Les guerres commerciales produisent rarement des résultats gagnants. Elles augmentent les coûts, perturbent l’investissement et injectent une incertitude inutile dans les décisions d’affaires. Le regain de confrontation entre les États-Unis et le Canada ne fait pas exception et, à court terme, il devrait peser sur la croissance canadienne. Toutefois, les répercussions à plus long terme pourraient en fait être plus constructives. Depuis des années, le Canada peine à convertir tous ses avantages, notamment ses ressources abondantes, sa stabilité politique et ses énormes réserves de capital institutionnel, en un investissement et une productivité plus solides. Les obstacles réglementaires, la lenteur des approbations de projets et la forte dépendance à l’égard du marché voisin des États-Unis ont constamment freiné l’économie. Le différend commercial actuel pourrait fournir la pression nécessaire pour susciter le changement.

Choc à court terme, catalyseur à plus long terme

Les dernières négociations ont échoué après que les modalités d’un accord potentiel eurent changé tard dans le processus. Ottawa a finalement quitté la table, soutenant que l’accord proposé affaiblirait des secteurs clés et limiterait la capacité du Canada à diversifier ses relations commerciales. L’administration Trump a ensuite annoncé des droits de douane de 50 % sur environ 20 G$ US d’exportations canadiennes, ce qui a amené le Canada à répliquer par des contre-tarifs équivalents sur des biens américains à compter du 8 septembre. L’incidence économique immédiate ne doit pas être minimisée, mais elle demeure également relativement circonscrite. Pour être clair, l’incidence totale est gérable. Environ 85 % des exportations canadiennes demeurent exemptées en vertu de l’ACEUM, tandis que les nouveaux droits de douane touchent environ 5 % des exportations totales. L’incertitude commerciale retardera probablement certains investissements et pèsera sur la croissance, mais il ne s’agit pas encore d’un désastre économique. Le Canada dispose aussi d’une capacité budgétaire plus importante que celle de bon nombre d’économies développées pour amortir le choc à court terme tout en soutenant l’investissement, et il aborde cette guerre commerciale avec une inflation relativement plus modérée.

Ce qui pourrait compter davantage, c’est la façon dont le Canada réagira. Le premier ministre Carney est entré en fonction avec un programme ambitieux visant à accélérer les projets d’infrastructure et de ressources, à réduire les obstacles à l’investissement et à attirer beaucoup plus de capitaux privés. La question persistante était de savoir si le Canada pourrait surmonter les obstacles réglementaires et politiques qui ont ralenti les grands projets par le passé.

Ce différend commercial pourrait catalyser le changement. Les nouveaux pipelines, les infrastructures de GNL, les projets de minéraux critiques et le transport d’électricité peuvent de plus en plus être présentés non seulement comme du développement économique, mais aussi comme des éléments de résilience nationale. L’élimination des barrières commerciales internes devient urgente lorsque le commerce extérieur est moins fiable. En ce sens, le différend augmente le coût de l’inaction. Un contexte politique unifié pourrait donner à Ottawa la marge de manœuvre nécessaire pour faire avancer des projets dont on discute depuis des années, mais qui se concrétisent rarement.

Il en résulte des perspectives inhabituelles à deux horizons : une croissance plus faible à court terme, mais un investissement intérieur et une productivité potentiellement plus solides au fil du temps.

Le Canada paraît différent vu de l’extérieur

Le contexte mondial des placements évolue également, alors que les flux commerciaux et de capitaux sont de plus en plus influencés par la politique. Les investisseurs accordent davantage d’attention à la stabilité institutionnelle, à l’accès aux ressources et à la fiabilité des contreparties. Dans ce contexte, les forces relatives du Canada prennent de la valeur. Des signes préliminaires indiquent que les capitaux internationaux deviennent plus réceptifs à l’égard du Canada. L’investissement direct étranger a atteint tout juste moins de 26 G$ CA au T2, en hausse par rapport à la moyenne de 21 G$ CA des quatre trimestres précédents. La demande étrangère pour les actifs financiers canadiens a également été forte. La majeure partie de ces achats s’est concentrée dans les obligations, mais les flux étrangers vers les actions canadiennes sont récemment redevenus positifs après plusieurs années de ventes persistantes (voir le graphique 1).

Graphique 1 – Les flux étrangers vers les actions canadiennes redeviennent positifs

Source : Statistique Canada

Le Canada dispose d’une occasion particulièrement opportune de susciter davantage d’intérêt. À la mi-septembre, Toronto accueillera le premier Sommet de l’investissement du Canada, conçu pour attirer des capitaux vers les entreprises et les infrastructures canadiennes. Il survient maintenant au moment où les investisseurs mondiaux réévaluent activement leur concentration géographique et leur exposition aux chaînes d’approvisionnement. Le Canada n’a pas besoin de remplacer les États-Unis comme destination mondiale des placements. Il peut simplement devenir plus attrayant à la marge.

Le capital est déjà ici

Le Canada dispose également d’une énorme source de capital intérieur. Les grandes caisses de retraite du pays gèrent collectivement environ 2,5 T$ CA, mais seulement environ le quart de leurs actifs sont actuellement investis au Canada. Toutefois, l’argument en faveur de l’investissement intérieur ne peut pas simplement reposer sur un appel à « acheter canadien ». Il exige de meilleures occasions. C’est pourquoi les réformes des politiques et le développement de projets comptent. Les infrastructures, l’énergie, la production d’électricité, les minéraux critiques et le transport sont des actifs de longue durée qui peuvent bien convenir aux investisseurs en régimes de retraite. Si le Canada peut accélérer les approbations et créer des projets plus attrayants sur le plan commercial, l’investissement intérieur pourrait augmenter parce que les occasions elles-mêmes seraient convaincantes.

Tirer le meilleur parti du moment

La confrontation commerciale demeure un frein économique à court terme, mais elle pourrait aussi mettre en évidence certaines des faiblesses structurelles dont le Canada discute depuis des années sans les corriger. C’est là que réside l’occasion. Rien ne garantit que le Canada transformera ce moment en changement durable. Les annonces de projets doivent encore se traduire par de véritables projets, et les réformes réglementaires doivent encore produire des résultats durables. Mais l’argument en faveur des placements est assurément devenu plus intéressant.

Stratégie de portefeuille

Les marchés canadiens ont fait preuve d’une résilience notable malgré l’escalade des tensions commerciales. Les actions canadiennes ont continué de bien se comporter, l’indice composé S&P/TSX surpassant l’indice S&P 500 tant depuis le début du trimestre (voir le graphique 2) que depuis le début de l’année (en monnaie locale). Parallèlement, le dollar canadien a mieux résisté que prévu depuis la reprise de la guerre commerciale, compte tenu de ce qui constituerait normalement un choc négatif important pour les perspectives intérieures. Cette résilience laisse croire que les investisseurs pourraient regarder au-delà de l’incidence immédiate sur la croissance. En même temps, les rendements obligataires ont augmenté à l’échelle mondiale, reflétant les pressions persistantes attribuables à une croissance solide du PIB nominal, aux dépenses budgétaires et, peut-être surtout, à la combinaison croissante des besoins de financement des secteurs public et privé. Aux États-Unis, la hausse des rendements est devenue suffisamment importante (voir le graphique 3) pour que le secrétaire au Trésor Bessent augmente les achats de titres du Trésor à long terme dans le cadre du programme de rachat. Les flux directs étaient faibles par rapport à la taille du marché, mais le signal était notable : les responsables du Trésor sont de plus en plus mal à l’aise devant des hausses désordonnées des rendements à long terme. Les obligations à long terme ont d’abord progressé, mais le mouvement s’est rapidement estompé, ce qui donne à penser que l’intervention des autorités pourrait ne pas éliminer la pression sous-jacente sur les taux à plus long terme. Parallèlement, les communications de plus en plus restrictives de la Fed, plus récemment de la part du président Warsh au symposium de politique économique de Jackson Hole, laissent entendre qu’une inflation persistante aux États-Unis pourrait encore forcer un resserrement de la politique monétaire.

Graphique 2 – Les actions canadiennes surpassent les autres marchés malgré la guerre commerciale

Sources : Bourse de Toronto, S&P Global, MSCI, Nasdaq, Macrobond

Graphique 3 – Les rendements des obligations du Trésor américain à 30 ans ont atteint leur plus haut niveau en près de 20 ans

Sources : Département du Trésor des États-Unis, Macrobond

Dans ce contexte, les portefeuilles équilibrés conservent une orientation globalement défensive, avec une exposition neutre aux actions. Au sein des actions, nous privilégions les actions canadiennes par rapport aux actions mondiales.

Au sein des titres à revenu fixe, la croissance canadienne plus faible et l’incertitude commerciale apportent un certain soutien tactique à la durée, mais les pressions persistantes à l’extrémité longue de la courbe commandent la prudence. Nous observons actuellement des occasions relativement attrayantes liées à l’accentuation pentification de la courbe des taux canadienne.

La stratégie des portefeuilles d’actions fondamentales demeure constructive, soutenue par des révisions positives des bénéfices et une activité économique résiliente. Nous continuons de favoriser des thèmes comme les infrastructures d’IA, les terres rares et la défense, tout en surveillant les principaux risques, notamment les pressions inflationnistes potentielles et tout ralentissement des dépenses d’investissement liées à l’IA.

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Trade wars rarely create winning outcomes. They raise costs, disrupt investment and inject unnecessary uncertainty into business decisions. The renewed US-Canada confrontation is no exception, and, in the near term, it is likely to weigh on Canadian growth. But the longer-term implications may actually be more constructive. For years, Canada has struggled to convert all its advantages, including abundant resources, political stability and enormous pools of institutional capital into stronger investment and productivity. Regulatory barriers, slow project approvals and heavy reliance on the neighbouring US marketplace have perpetually held the economy back. The current trade dispute may provide the pressure needed to make change.

Short-term shock, longer-term catalyst

The latest negotiations broke down after the terms of a potential agreement shifted late in the process. Ottawa ultimately walked away, arguing the proposed deal would weaken key industries and constrain Canada’s ability to diversify its trade relationships. The Trump administration then announced 50% tariffs on roughly US$20 billion of Canadian exports, prompting Canada to respond with matching counter-tariffs on US goods beginning September 8. The immediate economic impact should not be dismissed, but it also remains relatively contained. To be clear, the total impact is manageable. Roughly 85% of Canadian exports remain exempt under USMCA, while the newest tariffs affect approximately 5% of total exports. Trade uncertainty will likely delay some investment and weigh on growth, but this is not yet an economic disaster. Canada also has more fiscal capacity than many developed economies to cushion the near-term shock while supporting investment, and enters this trade war with relatively more subdued inflation.

What may matter more is how Canada responds. Prime Minister Carney entered office with an ambitious agenda to accelerate infrastructure and resource projects, reduce barriers to investment and attract significantly more private capital. The persistent question has been whether Canada could overcome the regulatory and political hurdles that have slowed major projects in the past.

This trade dispute could catalyze change. New pipelines, LNG infrastructure, critical-mineral projects and electricity transmission can increasingly be framed not simply as economic development, but as national resilience. Removing internal trade barriers becomes urgent when external trade is less dependable. In that sense, the dispute raises the cost of doing nothing. A unified political environment could give Ottawa the room to advance projects that have been discussed for years but rarely delivered upon.

The result is an unusual two-horizon outlook: weaker growth in the near term, but potentially stronger domestic investment and productivity over time.

Canada looks different from the outside

The global investment backdrop is also evolving as trade and capital flows become increasingly influenced by politics. Investors are paying more attention to institutional stability, access to resources and the reliability of counterparties. Against that backdrop, Canada’s relative strengths are becoming more valuable. There are tentative signs that international capital is becoming more receptive to Canada. Foreign direct investment reached just under C$26 billion in Q2, rising from the prior four-quarter average of C$21 billion. Foreign demand for Canadian financial assets has also been strong. Most of that buying has been in bonds, but foreign flows into Canadian equities have recently turned positive after several years of persistent selling (see Chart 1).

Chart 1 – Foreign flows in Canadian equities turn positive

Source: Statistics Canada

Canada has an unusually timely opportunity to capture more interest. In mid-September, Toronto will host the inaugural Canada Investment Summit, which was designed to attract capital into Canadian businesses and infrastructure. It now arrives as global investors are actively reconsidering geographic concentration and supply-chain exposure. Canada does not need to replace the US as a global investment destination. It simply can become more attractive at the margin.

The capital is already here

Canada also has an enormous domestic source of capital. The country’s major pension funds collectively manage roughly C$2.5 trillion, yet only about one-quarter of their assets are currently invested in Canada. A domestic investment case, however, cannot simply rest on a “Buy Canada” argument. It requires better opportunities. That is why policy reform and project development matter. Infrastructure, energy, power generation, critical minerals and transportation are long-duration assets that can be well suited to pension investors. If Canada can accelerate approvals and create more commercially attractive projects, greater domestic investment could follow because the opportunities themselves are compelling.

Making the most of the moment

The trade confrontation remains a near-term economic headwind, but it may also expose some of the structural weaknesses Canada has spent years discussing without fixing. That is the opportunity. There is no guarantee that Canada will convert this moment into lasting change. Project announcements still need to become actual projects, and regulatory reform still needs to produce lasting results. But the investment case has certainly become more interesting.

Portfolio strategy

Canadian markets have been notably resilient despite the escalation in trade tensions. Canadian equities have continued to perform well, with the S&P/TSX Composite Index outperforming the S&P500 on both a quarter-to-date (see Chart 2) and year-to-date basis (in local currency). Meanwhile, the Canadian dollar has held up better than expected since the trade war reignited, given what would normally be a significant negative shock to the domestic outlook. This resilience suggests investors may be looking beyond the immediate growth impact. At the same time, bond yields have moved higher globally, reflecting continued pressure from solid nominal GDP growth, fiscal spending and, perhaps most notably, the rising combination of public- and private-sector financing needs. In the US, the move in yields became significant enough (see Chart 3) that Treasury Secretary Bessent increased purchases of long-dated Treasuries through the buyback program. The direct flows were small relative to the market, but the signal was notable: Treasury officials are becoming increasingly uncomfortable with disorderly rises in long-term yields. Long bonds initially rallied, but the move faded quickly, suggesting policy intervention may not remove the underlying pressure on longer-term rates. At the same time, increasingly hawkish Fed communication, most recently from Chair Warsh at the Jackson Hole Economic Policy Symposium, suggests persistent US inflation could still force a tightening in monetary policy.

Chart 2 – Canadian equities outperform despite trade war

Source: Toronto Stock Exchange, S&P Global, MSCI, Nasdaq, Macrobond

Chart 3 – US 30-year yields reached highest level in nearly 20 years

Source: U.S. Department of Treasury, Macrobond

Against this backdrop, balanced portfolios maintain a broadly defensive stance, with flat equity exposure. Within equities, we have a preference for Canadian equities relative to global equities.

Within fixed income, softer Canadian growth and trade uncertainty provide some tactical support for duration, but continued pressure at the long end argues for caution. We currently see relatively attractive opportunities in Canadian yield curve steepening.

Fundamental equity portfolio strategy remains constructive, supported by positive earnings revisions and resilient economic activity. We continue to favour themes including AI infrastructure, rare earths and defence, while monitoring key risks including potential inflation pressures and any slowdown in AI capital spending.

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The global manufacturing PMI new orders index rose in August, though remains below an April high – see chart 1.

Chart 1

The solid August result is consistent with a rise in global six-month real narrow money momentum into early 2026. Growth, however, has eased since February, suggesting a moderation in new orders over the remainder of the year.

A July fall in real money momentum reflected deepening contractions in Europe and Japan, which offset a further pick-up in the US – chart 2.

Chart 2

The suggestion is that the US economy is running hot with the Fed behind the curve, while ECB and BoJ policy tightening is misguided, risking a sharp economic slowdown, or worse.

Meanwhile, six-month growth of global real narrow money is estimated to have fallen below that of industrial output in July, implying a less favourable liquidity backdrop for markets – chart 3.

Chart 3

A previous undershoot in April preceded a sharp correction in momentum stocks but real money growth recovered to close the gap in May / June, following which equity indices reached new highs.

The global services PMI survey for August was stronger than for manufacturing, with new business reaching a 20-month high. Services buoyancy, however, has little implication for manufacturing prospects. Granger-causality tests show that manufacturing new orders predict services new business but not vice versa. Manufacturing deceleration is likely to be reflected in services cooling.

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The global manufacturing PMI new orders index rose in August, though remains below an April high – see chart 1.

Chart 1

The solid August result is consistent with a rise in global six-month real narrow money momentum into early 2026. Growth, however, has eased since February, suggesting a moderation in new orders over the remainder of the year.

A July fall in real money momentum reflected deepening contractions in Europe and Japan, which offset a further pick-up in the US – chart 2.

Chart 2

The suggestion is that the US economy is running hot with the Fed behind the curve, while ECB and BoJ policy tightening is misguided, risking a sharp economic slowdown, or worse.

Meanwhile, six-month growth of global real narrow money is estimated to have fallen below that of industrial output in July, implying a less favourable liquidity backdrop for markets – chart 3.

Chart 3

A previous undershoot in April preceded a sharp correction in momentum stocks but real money growth recovered to close the gap in May / June, following which equity indices reached new highs.

The global services PMI survey for August was stronger than for manufacturing, with new business reaching a 20-month high. Services buoyancy, however, has little implication for manufacturing prospects. Granger-causality tests show that manufacturing new orders predict services new business but not vice versa. Manufacturing deceleration is likely to be reflected in services cooling.

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In a recent Investment Executive Soundbites interview, Lisa Conroy, CFA, Product Specialist on our Fundamental Equity team, discusses the outlook for Canadian equities and why a number of structural trends are creating compelling opportunities for Canadian companies. From onshoring and electrification to AI infrastructure investment, Lisa explains why Canada is well positioned to benefit from forces reshaping the global economy and where our team is finding opportunities across the Canadian market.

The post Lisa Conroy discusses opportunities in Canadian equities with Investment Executive appeared first on Groupe financier Connor, Clark & Lunn ltée.

Dans une récente entrevue accordée à Soundbites d’Investment Executive, Lisa Conroy, CFA, spécialiste des produits au sein de notre équipe des actions fondamentales, présente ses perspectives pour les actions canadiennes et explique pourquoi plusieurs tendances structurelles créent des occasions intéressantes pour les entreprises canadiennes. Du rapatriement des activités de production à l’électrification, en passant par les investissements dans les infrastructures liées à l’intelligence artificielle, Lisa explique pourquoi le Canada est bien placé pour tirer parti des forces qui transforment l’économie mondiale et où notre équipe trouve des occasions sur le marché canadien.

The post Lisa Conroy discute des occasions sur le marché des actions canadiennes avec Investment Executive appeared first on Groupe financier Connor, Clark & Lunn ltée.

Japan: Oasis of (political) stability

In February 2026, Japan’s first female prime minister Sanae Takaichi announced a snap election in the National Diet’s Lower House. She proceeded to win a commanding majority of roughly two-thirds of seats for her ruling conservative party, the Liberal Democratic Party (LDP). With conservative Osaka-based coalition partner, the Japan Innovation Party (JIP), the ruling coalition control about three-quarters of seats, providing a strong mandate to advance policy plans. After cycling through four prime ministers (including Sanae Takaichi) since the pandemic, Japan finally has political stability. In contrast, G7 peers like France, Germany, the UK and Italy are beset by fragile ruling coalitions or political infighting.
 

Figure 1: National Diet Lower House seats split by party before and after the snap February 2026 election

Source: Nikkei Asia

Fiscal investment, not consumption

The Takaichi administration is taking advantage of this electoral supermajority to pursue a more growth-oriented fiscal strategy with a ¥370+ trillion fiscal investment package into 17 strategic sectors through FY 2040E. Previous fiscal stimulus programs focused on consumer support and public works projects to prevent economic stagnation or to alleviate downturns and associated unemployment. However, Prime Minister Takaichi’s plan is aimed at boosting Japan’s long-term productive capacity.
 

Figure 2: Estimates of Japan’s real GDP potential growth rate from Bank of Japan and the Cabinet Office

Source: Bank of Japan, Cabinet Office via Bloomberg Economics

Figure 3: Annualized potential real GDP growth estimates across major economies

Sources: International Monetary Fund, Bank of Japan, Bank of Canada, Bank of Korea, USA Congressional Budget Office

Automation to offset a shrinking labour force

Against other advanced economies, Japan’s economic growth potential is low. This is partly due to its aging and falling population, but also because of low productivity relative to peers. The government and private firms both see automation, rather than mass immigration, as the solution to low productivity and structural labour shortages caused by an aging and declining population as well as insufficient technological adoption. By directing capital toward sectors such as automation, semiconductors, data centres, batteries and advanced healthcare, Prime Minister Takaichi’s fiscal plans seek to lift productivity, which will drive Japan’s long-term economic growth. Specifically, Prime Minister Takaichi’s fiscal roadmap includes allocations toward themes such as physical AI, advanced health care and soft power.
 

Figure 4: The Japanese economy’s capital intensity stagnated for two decades despite labour shortages

Sources: Bank of Japan, Cabinet Office, Ministry of Internal Affairs & Communications via Bloomberg

Figure 5: Prime Minister Takaichi’s fiscal stimulus plan through public-private partnerships into FY 2040E

Source: Cabinet Secretariat via Bank of America Global Research

Physical AI

Prime Minister Takaichi’s fiscal roadmap allocates ¥10.5 trillion to “physical AI.” This refers to the manifestation of Artificial Intelligence (AI) in the physical realm through robotics and automation. In Japan, labour shortages are concentrated in sectors where robots struggle to displace workers. For example, manufacturers have advanced machining tools, but too few operators to handle them. Logistics firms have sufficient trucks but too few drivers. Humanoid robotics and autonomous vehicles should eventually enable Japan to expand productivity via a capital-for-labour substitution.

In total, physical AI, semiconductors, data centre and battery investments comprise ¥101.6 trillion of the government’s 15-year ¥370 trillion fiscal investment plan. Our portfolios’ exposure to these core themes is concentrated in semiconductor production equipment makers and semiconductor material producers.

Tokyo Seimitsu Co. Ltd. (7729 JP)

Founded in 1949, Tokyo Seimitsu manufactures and sells metrology instruments and semiconductor production equipment for automotive, machine tools, semiconductors and aerospace, as well as charge and discharge testing systems for BEVs.

Micronics Japan Co. Ltd. (6871 JP)
Micronics Japan designs, produces and sells probe cards, which are used to inspect integrated circuits (ICs). The firm also manufactures wafer probers, probe card testers, IC handlers and inspection and testing devices used for liquid crystal display (LCD) manufacturing.

Horiba Ltd. (6856 JP)
Horiba manufactures and markets metrology instruments and analyzers. Key product lines include scientific/medical/emissions analyzers, environmental monitors for air/water and semiconductor testing equipment. Horiba has a local presence across China, Japan, Korea, India, Singapore, Thailand, Austria, France, Germany, the UK, the United States, Canada and Brazil.

Sumitomo Bakelite Co. Ltd. (4203 JP)
Sumitomo Bakelite Limited is an integrated processor of synthetic resins and a member of the Sumitomo Chemical Group, which retains a 10.5% equity stake. The firm’s materials are used during the production of electronic components such as chips and PCBs as well as in automotive where BEVs use more encapsulants. With an industry-leading 50% market share after acquiring Kyocera’s encapsulant business, the company is well-positioned to expand further, supported by the growth in automotive applications.

Kurita Water Industries Ltd. (6370 JP)
Kurita Water manufactures, sells and maintains water treatment equipment and facilities. It produces chemical consumables for precision cleaning and water purification. The company also manufactures equipment for wastewater treatment, purification, sanitation, soil remediation, sanitation and HVAC applications. Kurita Water remains Japan’s largest water treatment engineering firm.

Advanced health care

As Japan is a pioneer leading the world in aging, its government recognizes their firms’ “first-mover advantage” in tackling ailments. “Advanced health care” refers to pharmaceutical solutions and medical devices that improve human health. Prime Minister Takaichi’s fiscal plan allocates ¥64.1 trillion to pharmaceutical therapeutics such as antibody drug conjugates, bispecific antibodies, infectious disease vaccine R&D and AI-enabled medical device diagnostics. We have portfolio holdings that are positioned to benefit from the investments in this theme.

Asahi Intecc Co. Ltd. (7747 JP)
Asahi Intecc is a Japanese medical device manufacturer. Asahi operates through two segments. The medical segment develops, manufactures and sells private-label and OEM SKUs. The industrial devices segment develops, manufactures and sells components related to both medical and industrial products. It is the leading producer of interventional guidewires and microcatheters, perfected over 40 years with a longstanding presence in niche steel wire tech.

Sysmex Corporation (6869 JP)
Founded in 1968, Sysmex is the leader in hematology, hemostasis, invitro diagnostics, immunochemistry, urinalysis and the challenger in surgical robotics. The company designs, produces and supplies reagents, instruments, services and other products used in diagnostic tests.

Soft power

The government also understands the importance of “soft power.” This is the phenomenon of exerting geopolitical influence through cultural content such as manga, anime, music, and games. The fiscal plan outlines content investments worth ¥33.7 trillion to enable intellectual property (IP) monetization and new IP development, as well as the localization of Japanese cultural IP overseas, IP exports and tourism.

Sega Sammy Holdings Inc. (6460 JP)
Sega Sammy is the second largest gaming software and hardware producer by revenue, after Nintendo. Their entertainment content segment develops and sells games on third-party platforms (mobile, PC, consoles), licenses IP to film producers and goods manufacturers and sells equipment to arcade operators. Sega’s pachislot and pachinko machine segment manufactures and sells its products to game parlours. The resort segment operates hotels and golf courses at integrated resorts. The firm owns IP of major gaming franchises like Sonic the Hedgehog, Virtua Fighter, Yakuza and Angry Birds since 2023.

Kotobuki Spirits Co. Ltd. (2222 JP)
Kotobuki Spirits is a Japanese firm engaged in the manufacture and sale of confectioneries. It operates six segments: Sucrey, KCC, Seika Tajima, Sales Subsidiary, Kujuku Island and others. The firm is entering into retail after successfully operating via wholesalers.

The post Investing in Japan’s next chapter appeared first on Groupe financier Connor, Clark & Lunn ltée.

Japan: Oasis of (political) stability

In February 2026, Japan’s first female prime minister Sanae Takaichi announced a snap election in the National Diet’s Lower House. She proceeded to win a commanding majority of roughly two-thirds of seats for her ruling conservative party, the Liberal Democratic Party (LDP). With conservative Osaka-based coalition partner, the Japan Innovation Party (JIP), the ruling coalition control about three-quarters of seats, providing a strong mandate to advance policy plans. After cycling through four prime ministers (including Sanae Takaichi) since the pandemic, Japan finally has political stability. In contrast, G7 peers like France, Germany, the UK and Italy are beset by fragile ruling coalitions or political infighting.
 

Figure 1: National Diet Lower House seats split by party before and after the snap February 2026 election

Source: Nikkei Asia

Fiscal investment, not consumption

The Takaichi administration is taking advantage of this electoral supermajority to pursue a more growth-oriented fiscal strategy with a ¥370+ trillion fiscal investment package into 17 strategic sectors through FY 2040E. Previous fiscal stimulus programs focused on consumer support and public works projects to prevent economic stagnation or to alleviate downturns and associated unemployment. However, Prime Minister Takaichi’s plan is aimed at boosting Japan’s long-term productive capacity.
 

Figure 2: Estimates of Japan’s real GDP potential growth rate from Bank of Japan and the Cabinet Office

Source: Bank of Japan, Cabinet Office via Bloomberg Economics

Figure 3: Annualized potential real GDP growth estimates across major economies

Sources: International Monetary Fund, Bank of Japan, Bank of Canada, Bank of Korea, USA Congressional Budget Office

Automation to offset a shrinking labour force

Against other advanced economies, Japan’s economic growth potential is low. This is partly due to its aging and falling population, but also because of low productivity relative to peers. The government and private firms both see automation, rather than mass immigration, as the solution to low productivity and structural labour shortages caused by an aging and declining population as well as insufficient technological adoption. By directing capital toward sectors such as automation, semiconductors, data centres, batteries and advanced healthcare, Prime Minister Takaichi’s fiscal plans seek to lift productivity, which will drive Japan’s long-term economic growth. Specifically, Prime Minister Takaichi’s fiscal roadmap includes allocations toward themes such as physical AI, advanced health care and soft power.
 

Figure 4: The Japanese economy’s capital intensity stagnated for two decades despite labour shortages

Sources: Bank of Japan, Cabinet Office, Ministry of Internal Affairs & Communications via Bloomberg

Figure 5: Prime Minister Takaichi’s fiscal stimulus plan through public-private partnerships into FY 2040E

Source: Cabinet Secretariat via Bank of America Global Research

Physical AI

Prime Minister Takaichi’s fiscal roadmap allocates ¥10.5 trillion to “physical AI.” This refers to the manifestation of Artificial Intelligence (AI) in the physical realm through robotics and automation. In Japan, labour shortages are concentrated in sectors where robots struggle to displace workers. For example, manufacturers have advanced machining tools, but too few operators to handle them. Logistics firms have sufficient trucks but too few drivers. Humanoid robotics and autonomous vehicles should eventually enable Japan to expand productivity via a capital-for-labour substitution.

In total, physical AI, semiconductors, data centre and battery investments comprise ¥101.6 trillion of the government’s 15-year ¥370 trillion fiscal investment plan. Our portfolios’ exposure to these core themes is concentrated in semiconductor production equipment makers and semiconductor material producers.

Tokyo Seimitsu Co. Ltd. (7729 JP)

Founded in 1949, Tokyo Seimitsu manufactures and sells metrology instruments and semiconductor production equipment for automotive, machine tools, semiconductors and aerospace, as well as charge and discharge testing systems for BEVs.

Micronics Japan Co. Ltd. (6871 JP)
Micronics Japan designs, produces and sells probe cards, which are used to inspect integrated circuits (ICs). The firm also manufactures wafer probers, probe card testers, IC handlers and inspection and testing devices used for liquid crystal display (LCD) manufacturing.

Horiba Ltd. (6856 JP)
Horiba manufactures and markets metrology instruments and analyzers. Key product lines include scientific/medical/emissions analyzers, environmental monitors for air/water and semiconductor testing equipment. Horiba has a local presence across China, Japan, Korea, India, Singapore, Thailand, Austria, France, Germany, the UK, the United States, Canada and Brazil.

Sumitomo Bakelite Co. Ltd. (4203 JP)
Sumitomo Bakelite Limited is an integrated processor of synthetic resins and a member of the Sumitomo Chemical Group, which retains a 10.5% equity stake. The firm’s materials are used during the production of electronic components such as chips and PCBs as well as in automotive where BEVs use more encapsulants. With an industry-leading 50% market share after acquiring Kyocera’s encapsulant business, the company is well-positioned to expand further, supported by the growth in automotive applications.

Kurita Water Industries Ltd. (6370 JP)
Kurita Water manufactures, sells and maintains water treatment equipment and facilities. It produces chemical consumables for precision cleaning and water purification. The company also manufactures equipment for wastewater treatment, purification, sanitation, soil remediation, sanitation and HVAC applications. Kurita Water remains Japan’s largest water treatment engineering firm.

Advanced health care

As Japan is a pioneer leading the world in aging, its government recognizes their firms’ “first-mover advantage” in tackling ailments. “Advanced health care” refers to pharmaceutical solutions and medical devices that improve human health. Prime Minister Takaichi’s fiscal plan allocates ¥64.1 trillion to pharmaceutical therapeutics such as antibody drug conjugates, bispecific antibodies, infectious disease vaccine R&D and AI-enabled medical device diagnostics. We have portfolio holdings that are positioned to benefit from the investments in this theme.

Asahi Intecc Co. Ltd. (7747 JP)
Asahi Intecc is a Japanese medical device manufacturer. Asahi operates through two segments. The medical segment develops, manufactures and sells private-label and OEM SKUs. The industrial devices segment develops, manufactures and sells components related to both medical and industrial products. It is the leading producer of interventional guidewires and microcatheters, perfected over 40 years with a longstanding presence in niche steel wire tech.

Sysmex Corporation (6869 JP)
Founded in 1968, Sysmex is the leader in hematology, hemostasis, invitro diagnostics, immunochemistry, urinalysis and the challenger in surgical robotics. The company designs, produces and supplies reagents, instruments, services and other products used in diagnostic tests.

Soft power

The government also understands the importance of “soft power.” This is the phenomenon of exerting geopolitical influence through cultural content such as manga, anime, music, and games. The fiscal plan outlines content investments worth ¥33.7 trillion to enable intellectual property (IP) monetization and new IP development, as well as the localization of Japanese cultural IP overseas, IP exports and tourism.

Sega Sammy Holdings Inc. (6460 JP)
Sega Sammy is the second largest gaming software and hardware producer by revenue, after Nintendo. Their entertainment content segment develops and sells games on third-party platforms (mobile, PC, consoles), licenses IP to film producers and goods manufacturers and sells equipment to arcade operators. Sega’s pachislot and pachinko machine segment manufactures and sells its products to game parlours. The resort segment operates hotels and golf courses at integrated resorts. The firm owns IP of major gaming franchises like Sonic the Hedgehog, Virtua Fighter, Yakuza and Angry Birds since 2023.

Kotobuki Spirits Co. Ltd. (2222 JP)
Kotobuki Spirits is a Japanese firm engaged in the manufacture and sale of confectioneries. It operates six segments: Sucrey, KCC, Seika Tajima, Sales Subsidiary, Kujuku Island and others. The firm is entering into retail after successfully operating via wholesalers.

The post Investing in Japan’s next chapter appeared first on Groupe financier Connor, Clark & Lunn ltée.

The manufacturing PMI reached a 51-month high in August, according to flash data released last week. Recent strength was signalled by an upswing in six-month real narrow money momentum into July 2025 followed by a consolidation into early 2026 – see chart 1.

Chart 1

Real money momentum, however, has fallen sharply since February, turning negative in April and weakening further in July. Allowing for the usual six to 12 months lead, this suggests that the PMI is entering a time window to begin another sustained decline.

The fall in real narrow money momentum reflects a combination of a slowdown in nominal growth, probably explicable by misguided ECB policy tightening, and an energy-driven pick-up in six-month consumer price inflation – chart 2.

Chart 2

A country breakdown is available for the deposit component of narrow money but not currency in circulation. Six-month real deposit momentum is negative across the big four, with the largest contractions in France and Italy.

Chart 3

French monetary weakness suggests rising economic / fiscal risks, appreciation of which may explain a fall in demand for French government debt. Bond purchases by Eurozone banks in the 12 months to July were smaller than in the other big four markets, a reversal of the position a year ago – chart 4.

Chart 4

Further details show that purchases of French bonds by both French banks and other Eurozone institutions have slowed. French banks bought only €7.0 bn in the year to July, down from €48.9 bn in the prior 12 months.

The fall in demand for French bonds by French banks follows a reduction in the ownership percentage of French insurers and other domestic investors in recent years. Accordingly, the share of debt owned by non-residents rose to 57.5% in Q1 2026, a nine-year high – chart 5.

Chart 5

The post Eurozone money update: French weakness appeared first on Groupe financier Connor, Clark & Lunn ltée.

The manufacturing PMI reached a 51-month high in August, according to flash data released last week. Recent strength was signalled by an upswing in six-month real narrow money momentum into July 2025 followed by a consolidation into early 2026 – see chart 1.

Chart 1

Real money momentum, however, has fallen sharply since February, turning negative in April and weakening further in July. Allowing for the usual six to 12 months lead, this suggests that the PMI is entering a time window to begin another sustained decline.

The fall in real narrow money momentum reflects a combination of a slowdown in nominal growth, probably explicable by misguided ECB policy tightening, and an energy-driven pick-up in six-month consumer price inflation – chart 2.

Chart 2

A country breakdown is available for the deposit component of narrow money but not currency in circulation. Six-month real deposit momentum is negative across the big four, with the largest contractions in France and Italy.

Chart 3

French monetary weakness suggests rising economic / fiscal risks, appreciation of which may explain a fall in demand for French government debt. Bond purchases by Eurozone banks in the 12 months to July were smaller than in the other big four markets, a reversal of the position a year ago – chart 4.

Chart 4

Further details show that purchases of French bonds by both French banks and other Eurozone institutions have slowed. French banks bought only €7.0 bn in the year to July, down from €48.9 bn in the prior 12 months.

The fall in demand for French bonds by French banks follows a reduction in the ownership percentage of French insurers and other domestic investors in recent years. Accordingly, the share of debt owned by non-residents rose to 57.5% in Q1 2026, a nine-year high – chart 5.

Chart 5

The post Eurozone money update: French weakness appeared first on Groupe financier Connor, Clark & Lunn ltée.