Duskin is the weirdest company I’ve seen in a long time. The name is a mashup of the English “Dust” and the Japanese word for cleaning cloth, “zokin,” which tells you everything about where this company started, and yet nothing why its biggest business is Japan’s most beloved donut chain.

A company that prides themselves of renting out chemical floor mops and while Pon de Ring donuts (my favorite donut in the whole world by the way) under one ticker genuinely broke my brain.

So I did what I always do: I ran the numbers to see whether this weird concuction is a buying opportunity or a value trap.

Executive Summary

KonichiValue Score for Duskin Co. Ltd. (4665.T): Sell | Last: 4,478 JPY | Mkt Cap: 214.67 Billion JPY

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I finally got around to reading the book Active Value Investing by the other day. The man is one of the greats, and I have learned more about pinning down a company's intrinsic value from him than from Warren Buffett himself.

Okinawa Cellular Telephone popped up on my quantitative screener last week with metrics that immediately reminded me of his brilliant thesis on Charter Communications (CHTR). I listened to an interview where he raved about Charter because it operated as a localized broadband monopoly that generated absurd, predictable cash flow while relentlessly cannibalizing its own share count to force per-share value higher.

Okinawa Cellular runs this exact same localized monopoly playbook in Japan, but they pair it with a pristine, unlevered balance sheet instead of the terrifying debt loads typically found in American cable companies. I had to dig deep into the valuation math to see if he, and I, would actually love this stock today.

Executive Summary

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Kioxia Holdings (285A.T): Hold | Last: ¥71,870 | Mkt Cap: ¥39.45T (US$242.6B)

In 1987, Dr. Fujio Masuoka filed a patent at Toshiba for something the world was not ready for. It was NAND flash memory, the foundation underneath every smartphone, every SSD, and every AI data center on the planet. Toshiba took the credit, paid him less than a million dollars for the patents, and then spent the next three decades systematically running the parent company into the ground:

That orphan is now Kioxia Holdings (285A.T). The stock climbed 6,500% from its IPO, ripped to ¥112,700, briefly overtook Toyota as Japan’s most valuable company! Right after, the stock dropped 36% in weeks. The dip is either the buy of a decade or the top of a cycle.

The market is hurling billions a quarter at software and AI startups with no FCF, while the industrial monopolies actually building the AI boom trade like regulated utilities.

Kioxia is the cleanest pure-play on that gap.

Executive Summary

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It’s as if Toshiba angered the Greek gods and caught a reverse Midas touch…Instead of gold, everything they touched turned to ash. They championed HD DVD right as the entire planet switched to Blu-ray. Then they paid an insanely criticized premium to buy the US nuclear firm Westinghouse in 2006, betting their entire fortunes on a global nuclear renaissa…

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Today, , my dear friend and mastermind behind the institutional-grade equity research over at Asian Century Stocks, joins me to break down South Korea’s massive reforms, the brutal reality of Asian value traps, and why the global AI race is going to end in total commoditization.

(Disclaimer: Any stocks or investments discussed are not financial advice; this conversation is strictly for entertainment purposes only.)

1. The Five-Year Bet: Which Asian Country Gets Your Entire Net Worth?

Michael Fritzell: South Korea. They are actively copying the corporate reform playbook that the Tokyo Stock Exchange pioneered. While everyone is staring at the major indices, I see massive, underappreciated value across the small-cap space, a universe of two to three thousand stocks that are significantly cheaper than anything you will find in other developed markets.

The real catalyst is the mid-2025 introduction of fiduciary duty for directors. Directors will finally be legally responsible for all shareholders’ interests, not just the controlling family blocks. This makes minority abuse and shady related-party transactions incredibly difficult to pull off. Shareholder activism is blossoming early here, meaning minority investors can simply piggyback on campaigns by powerhouse firms like Oasis and Dalton to unlock deep value.

However, do not touch the major index. I would never buy the Kospi right here. Its entire rally has been artificially driven by AI CapEx and memory chip stocks experiencing a massive squeeze in DRAM prices, which is completely unsustainable over the long term.

2. The Dumbest Value Trap Western Investors Fall For in Asia

Michael Fritzell: Investors consistently fail to look at the actual character of the people running the business. The hard truth about investing in Asia, or honestly anywhere, is that you cannot rely on the legal system to protect you. At the end of the day, if these people want to cheat you, they can.

You have to ignore the spreadsheet and audit their public track record instead. Look at their historical capital allocation, their corporate structure complexity, and whether they have a habit of diluting shareholders or routing money into sister companies.

A stock can look flawless on paper with 60% to 70% of its market cap sitting entirely in cash. But if the founder has a decades-long track record of refusing to pay out a single cent, that cash position is completely irrelevant, it is a value trap. You are stuck waiting for a generational shift, like a son taking over the business and finally launching buybacks or dividends.

3. Singapore vs. Tokyo: Why Do Expats Choose the Lion City?

Michael Fritzell: Singapore wins purely on the perception that the hurdles to entry are lower, backed by world-class government marketing. The Singaporean government literally sponsored part of the production for Crazy Rich Asians because they understand how to build a global brand name. It just feels easier to integrate there initially.

Objectively, Tokyo is one of the coolest cities on earth, and Japan has an incredible, relaxed vibe where people seem genuinely more content. If Japan offered a legitimate golden visa and competitive tax benefits for expats, people like me would flock to Tokyo over Singapore in a heartbeat.

4. Will Japan’s GDP Shrink or Grow Over the Next Decade?

Michael Fritzell: Japan is fundamentally losing its structural competitiveness. Giants like Toyota and Daikin used to completely dominate export markets in developing countries, but they are now facing brutal competition from private Chinese companies led by young, hungry, 40-something managers.

Because of this, I expect Japan to suffer continued market share loss and a relative decline in GDP per capita. To reverse this, Japan desperately needs aggressive entrepreneurship from younger people who want to get rich, rather than just coasting on legacy firms formed in the 1950s and 60s like Sony and Casio. We need to see a Japanese equivalent of Spotify pop up, but those examples are incredibly rare right now.

5. The Best Political Leader in Asian History

Michael Fritzell: Deng Xiaoping. He did an immeasurable service to the Chinese population by dragging the country out of an incredibly backward, painful state during the 1960s. People frequently try to rewrite history, but the reality of that era was exceptionally rough.

That said, history hasn’t ended yet. China remains a communist country, and under the current framework, we still do not know where the economy will ultimately end up.

6. Can the Rest of Asia Compete in the Global AI Race?

Michael Fritzell: The software side of large language models is going to be completely commoditized. China has the capital and resources to copy and keep pace with American models, but outside of the US and China, no one else is going to build a standalone giant.

The structural issue with AI models is a total lack of pricing power because there are too many substitutes. There is very little true differentiation between Gemini, ChatGPT, or DeepSeek. Eventually, the hype will fade, the technology will commoditize, and the rest of the world will simply default to the cheapest, most accessible models provided by Google or Chinese tech giants.

7. Does Europe Have an Economic Future?

Michael Fritzell: Europe will be fine; the absolute doom loop narrative is completely off-base. Europe’s manufacturing base was crushed over the last 30 years because Western multinationals outsourced their factories to China, allowing their technological know-how to be copied. Now, that tech spillover is grinding to a halt as foreign direct investment into China plummets.

Meanwhile, places like the Nordic region maintain incredibly vibrant entrepreneurship and exceptional living standards. The current financial media is dominated by social-media-driven culture wars and a hyper-hot US stock market narrative. Back in 2010, the narrative was that the US was dying under a mountain of debt. Narratives shift rapidly, and the current misperceptions about Europe will disappear over time.

8. Are Chinese Stocks Uninvestable or the Bargain of the Decade?

Michael Fritzell: Over the long term, you simply should not invest in countries that refuse to protect minority shareholders. In China, the penalties for cheating foreign investors are virtually nonexistent. The Chinese internet index (KWEB) has been entirely flat for 10 years during the greatest Nasdaq tech bull market in history, and the CSI 300 is flat over a 35-year horizon.

This isn’t because the underlying companies are bad, they are actually performing very well operationally. It is the direct result of continuous share dilution and the atrocious treatment of minorities. Aside from massive, shareholder-friendly exceptions like Tencent or NetEase, foreign capital is heavily exposed. The domestic A-share market will survive because locals need an inflation hedge to protect their savings, but for foreigners, it remains highly hazardous.

9. The One Asian Market to Avoid Right Now

Michael Fritzell: India. Prime Minister Modi has done fantastic things for the country’s infrastructure and entrepreneurship, but the valuation multiples make absolutely no sense. You have standard Indian consumer stocks trading at 40, 50, or 60 times PE.

These businesses are not managed any better than equivalent companies in the Philippines or Indonesia, yet in Indonesia, you are only paying 8 times PE for the exact same fundamental quality. When a market’s story becomes that extreme, it is time to take the other side of the trade.

10. Asia’s Finest: The Most Important Business Leader in the Region

Michael Fritzell: Morris Chang, the founder of TSMC. Building a $2 trillion powerhouse out of Taiwan, a small island of just 22 million people, is one of the most remarkable feats in business history. Not even mainland China has successfully built a trillion-dollar company.

Chang completely revolutionized global tech by pioneering the independent foundry model. Instead of building closed ecosystems like Intel, TSMC acted as a neutral manufacturing partner for fabless chip designers worldwide. This strategy unlocked massive scale, generated immense returns on equity, and allowed them to out-invest the entire world in R&D. Even if they face future headwinds, the modern technological world entirely exists because of Morris Chang’s blueprint.

Today, Michael Fritzell, my dear friend and mastermind behind the institutional-grade equity research over at Asian Century Stocks, joins me to break down South Korea’s massive reforms, the brutal reality of Asian value traps, and why the global AI race is going to end in total commoditization.

(Disclaimer: Any stocks or investments discussed are not financial advice; this conversation is strictly for entertainment purposes only.)

1. The Five-Year Bet: Which Asian Country Gets Your Entire Net Worth?

Michael Fritzell: South Korea. They are actively copying the corporate reform playbook that the Tokyo Stock Exchange pioneered. While everyone is staring at the major indices, I see massive, underappreciated value across the small-cap space, a universe of two to three thousand stocks that are significantly cheaper than anything you will find in other developed markets.

The real catalyst is the mid-2025 introduction of fiduciary duty for directors. Directors will finally be legally responsible for all shareholders’ interests, not just the controlling family blocks. This makes minority abuse and shady related-party transactions incredibly difficult to pull off. Shareholder activism is blossoming early here, meaning minority investors can simply piggyback on campaigns by powerhouse firms like Oasis and Dalton to unlock deep value.

However, do not touch the major index. I would never buy the Kospi right here. Its entire rally has been artificially driven by AI CapEx and memory chip stocks experiencing a massive squeeze in DRAM prices, which is completely unsustainable over the long term.

2. The Dumbest Value Trap Western Investors Fall For in Asia

Michael Fritzell: Investors consistently fail to look at the actual character of the people running the business. The hard truth about investing in Asia, or honestly anywhere, is that you cannot rely on the legal system to protect you. At the end of the day, if these people want to cheat you, they can.

You have to ignore the spreadsheet and audit their public track record instead. Look at their historical capital allocation, their corporate structure complexity, and whether they have a habit of diluting shareholders or routing money into sister companies.

A stock can look flawless on paper with 60% to 70% of its market cap sitting entirely in cash. But if the founder has a decades-long track record of refusing to pay out a single cent, that cash position is completely irrelevant, it is a value trap. You are stuck waiting for a generational shift, like a son taking over the business and finally launching buybacks or dividends.

3. Singapore vs. Tokyo: Why Do Expats Choose the Lion City?

Michael Fritzell: Singapore wins purely on the perception that the hurdles to entry are lower, backed by world-class government marketing. The Singaporean government literally sponsored part of the production for Crazy Rich Asians because they understand how to build a global brand name. It just feels easier to integrate there initially.

Objectively, Tokyo is one of the coolest cities on earth, and Japan has an incredible, relaxed vibe where people seem genuinely more content. If Japan offered a legitimate golden visa and competitive tax benefits for expats, people like me would flock to Tokyo over Singapore in a heartbeat.

4. Will Japan’s GDP Shrink or Grow Over the Next Decade?

Michael Fritzell: Japan is fundamentally losing its structural competitiveness. Giants like Toyota and Daikin used to completely dominate export markets in developing countries, but they are now facing brutal competition from private Chinese companies led by young, hungry, 40-something managers.

Because of this, I expect Japan to suffer continued market share loss and a relative decline in GDP per capita. To reverse this, Japan desperately needs aggressive entrepreneurship from younger people who want to get rich, rather than just coasting on legacy firms formed in the 1950s and 60s like Sony and Casio. We need to see a Japanese equivalent of Spotify pop up, but those examples are incredibly rare right now.

5. The Best Political Leader in Asian History

Michael Fritzell: Deng Xiaoping. He did an immeasurable service to the Chinese population by dragging the country out of an incredibly backward, painful state during the 1960s. People frequently try to rewrite history, but the reality of that era was exceptionally rough.

That said, history hasn’t ended yet. China remains a communist country, and under the current framework, we still do not know where the economy will ultimately end up.

6. Can the Rest of Asia Compete in the Global AI Race?

Michael Fritzell: The software side of large language models is going to be completely commoditized. China has the capital and resources to copy and keep pace with American models, but outside of the US and China, no one else is going to build a standalone giant.

The structural issue with AI models is a total lack of pricing power because there are too many substitutes. There is very little true differentiation between Gemini, ChatGPT, or DeepSeek. Eventually, the hype will fade, the technology will commoditize, and the rest of the world will simply default to the cheapest, most accessible models provided by Google or Chinese tech giants.

7. Does Europe Have an Economic Future?

Michael Fritzell: Europe will be fine; the absolute doom loop narrative is completely off-base. Europe’s manufacturing base was crushed over the last 30 years because Western multinationals outsourced their factories to China, allowing their technological know-how to be copied. Now, that tech spillover is grinding to a halt as foreign direct investment into China plummets.

Meanwhile, places like the Nordic region maintain incredibly vibrant entrepreneurship and exceptional living standards. The current financial media is dominated by social-media-driven culture wars and a hyper-hot US stock market narrative. Back in 2010, the narrative was that the US was dying under a mountain of debt. Narratives shift rapidly, and the current misperceptions about Europe will disappear over time.

8. Are Chinese Stocks Uninvestable or the Bargain of the Decade?

Michael Fritzell: Over the long term, you simply should not invest in countries that refuse to protect minority shareholders. In China, the penalties for cheating foreign investors are virtually nonexistent. The Chinese internet index (KWEB) has been entirely flat for 10 years during the greatest Nasdaq tech bull market in history, and the CSI 300 is flat over a 35-year horizon.

This isn’t because the underlying companies are bad, they are actually performing very well operationally. It is the direct result of continuous share dilution and the atrocious treatment of minorities. Aside from massive, shareholder-friendly exceptions like Tencent or NetEase, foreign capital is heavily exposed. The domestic A-share market will survive because locals need an inflation hedge to protect their savings, but for foreigners, it remains highly hazardous.

9. The One Asian Market to Avoid Right Now

Michael Fritzell: India. Prime Minister Modi has done fantastic things for the country’s infrastructure and entrepreneurship, but the valuation multiples make absolutely no sense. You have standard Indian consumer stocks trading at 40, 50, or 60 times PE.

These businesses are not managed any better than equivalent companies in the Philippines or Indonesia, yet in Indonesia, you are only paying 8 times PE for the exact same fundamental quality. When a market’s story becomes that extreme, it is time to take the other side of the trade.

10. Asia’s Finest: The Most Important Business Leader in the Region

Michael Fritzell: Morris Chang, the founder of TSMC. Building a $2 trillion powerhouse out of Taiwan, a small island of just 22 million people, is one of the most remarkable feats in business history. Not even mainland China has successfully built a trillion-dollar company.

Chang completely revolutionized global tech by pioneering the independent foundry model. Instead of building closed ecosystems like Intel, TSMC acted as a neutral manufacturing partner for fabless chip designers worldwide. This strategy unlocked massive scale, generated immense returns on equity, and allowed them to out-invest the entire world in R&D. Even if they face future headwinds, the modern technological world entirely exists because of Morris Chang’s blueprint.

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Chofu Seisakusho looks like the ultimate value investor dream on paper.

Heat pumps are the new industrial gold rush. As extreme temperatures drive massive global demand for climate-control technology, the entire HVAC sector is catching a massive tailwind. As a premier expert in this exact hardware, Chofu should be printing money right now.

Instead, we find them sitting here in the dirt. Because how does a profitable company in a booming sector trade at less than half of its book value?!

My immediate gut feeling was that the book value had to be a lie. But the assets are very real. Their technology is genuinely world class. They hold over JPY 91 billion in long term investments. Meanwhile, the entire market capitalization sits around JPY 69 billion.

I assumed their assets were tied up in worthless inventory or obsolete factories. But the reality of Chofu Seisakusho is much stranger and far more frustrating.

So follow me as I dive into the most absurd capital allocator I’ve ever seen to determine if you should actually buy this stock:

Executive Summary

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Europe stubbornly refused to adopt air conditioning for decades. The continent romanticized sweltering in brick ovens, resulting in an entirely preventable mega-death of the elderly during heatwaves. Temperatures routinely smash past the 40°C mark across Europe today.

This proves a terrifying global truth about climate change: You can’t escape global warming by opening a window anymore! And sadly, the only real weapons we have against this are air conditioners and heat pumps.

This is not just a European awakening. The trend for an ever-increasing demand for HVAC systems is global, and investors are taking note. However, they all to often blindly chase the obvious mega-caps while ignoring the infrastructure and maintenance companies that actually keep these systems running.

And turns out, Japan is home to the strongest HVAC companies in the world!

Therefore, I am writing this report to ruthlessly dissect four Japanese HVAC pure-plays through a strict value-investing lens, stripping away market noise to identify the most compelling investment opportunity.

Here are the most interesting HVAC companies in Japan:

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For Part 1 & 2 of this series on Japan’s FinTwit (www9945 and Mikimaru), see:

&

If Mikimaru is the perks-loving small-cap hunter and www9945 is the street-scouting everyman, then Kabu1000 is Japan’s final boss of retail investing.

Kabu1000 has been around the investing scene forever!

He started in the late 1980s with just ¥400,000, never took a ”normal” job, and methodically turned that stake into over ¥900 million. Today he’s widely seen as Japan’s most famous individual investor, and the purest expression of classic value investing in the country.

What makes him different is how he got to 1000x his money: By obsessing over balance sheets, only touching stocks that trade below their intrinsic value, and insisting on a margin of safety big enough that he can sleep at night. He loves the kind of companies most people scroll past; asset-heavy industrials, land-rich old-economy names, small caps trading at a steep discount to book, especially when there’s a realistic catalyst like a buyout, restructuring, or asset sale.

Kabu1000 builds a tight portfolio of roughly 20–30 names where downside is protected by hard assets and upside comes from Japan-specific tailwinds: Tokyo Stock Exchange pressure on low-P/B stocks, rising buyouts, and governance reforms slowly forcing lazy balance sheets to work harder.

In this final part of the series, I’ll walk through his journey, the principles he refuses to compromise on, his holdings, and what the rest of us can steal from Japan’s most famous retail investor.

Kabu1000’s Journey

If one individual bridges Japan’s past and future of value investing, it’s Kabu1000 (かぶ1000 - which means “Stock 1000x”).

He started investing as a middle-schooler in 1988, turned ¥40万 (≈$3k) of savings into ¥9億 (≈$7.5 million) over time (a 1000-bagger gain, which inspired his moniker), and by 2011 had reached the “億り人” seven-figure club. As of 2026, he has 38 years of market experience, has authored multiple investment books, and boasts 350,000+ followers on X.

Despite this fame, Kabu1000 is known for his almost academic rigor and humility. He frequented a local brokerage in junior high, amassed ¥3 million by 9th grade, ¥10 million by 10th grade, and ¥15 million by 11th grade through savvy stock plays.

After finishing a finance vocational school, he even declined a job offer from a securities firm to go full-time investor straight away. In his late 30s, he achieved a ¥100 million portfolio, and by early 2026 his cumulative trading profits officially hit the monumental ¥900 million mark (not including dividends).

Remarkably, he’s never held a traditional job or even a side gig. A “rooted-from-birth professional investor”, as one article put it. With this lifetime of experience, Kabu1000 has become a sort of philosopher of value investing in Japan, often sharing wisdom in interviews and lectures. (His recent book is literally titled “The Way to Become a Wise Individual Investor”).

Kabu1000’s Investment Philosophy

At the core, Kabu1000’s investment philosophy follows classic Graham-and-Buffett principles, distilled into a few key tenets he often cites.

First, investing is about thorough analysis, principal protection, and adequate returns; anything that doesn’t meet those criteria is speculation.

Second, never put all your capital in one basket, taking on excessive risk will lead to mental anguish and ruin.

Third, the difference between an investor and a speculator is attitude toward market fluctuations: The speculator tries to predict price moves to make a quick profit, while the investor focuses on acquiring good securities at good prices and holding them.

Fourth, he aggressively preaches the margin of safety. Kabu1000 takes Benjamin Graham’s classic playbook and applies it to Japan’s notoriously cash-rich, low-valuation market. He hunts for asset-heavy companies trading at rock-bottom P/B ratios, buying deep discounts and holding until a catalyst, like a buyout, restructuring, or activist pressure, unlocks the trapped wealth.

The Tokyo Stock Exchange’s 2024 push to raise ROE perfectly validated his strategy, sparking massive buybacks and dividend hikes among low-P/B stocks. He expects this value-unlocking trend for “低PBR、低PER銘柄” (low P/B and P/E names) to accelerate alongside rising M&A. As major corporate shake ups, like the previously rumored Honda-Nissan alliance, force lucrative asset sales, his playbook is simple: Buy these hidden gems long before the market wakes up.

Kabu1000 typically runs a fairly concentrated portfolio (around 20–30 stocks), much smaller than www9945’s hundred-plus names. “I keep about 20 core holdings, focusing on those with the highest expected value and aligning with my time horizon,” he wrote for his 2025 strategy.

He finds that number strikes a balance between concentration and diversification, enough to avoid the “all eggs in one basket” pitfall he warns against but focused enough to beat the market if his picks are right. And indeed, his performance has often been stellar: He targets 20% annual returns, and in 2021–2025 he achieved around +25% each year (2024 was +22.6% before tax, but in 2025 he absolutely crushed it with a +64.53% return, banking over ¥258 million in profit).

This comfortably beat Tokyo indices. When the 2008 Lehman Shock hit, he temporarily pivoted to small-cap growth, posting a 70% gain in 2012, before shifting back to value. His long-term track record proves his mastery of capital preservation: He captures massive upside in bull markets (+¥148 million in 2023) while strictly capping his losses during crashes.

Looking ahead to 2026, Kabu1000 is slightly shifting his playbook to adapt to a permanently inflationary Japan. He is heavily targeting domestic supply chain reshoring and factory automation plays to combat labor shortages. Surprisingly for a deep-value purist, he's also now willing to buy "Growth" stocks trading above a 1.0x P/B ratio, provided their future trajectory and technological moat justify the price.

Kabu1000’s Stock Holdings

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Japan is currently the hottest new thing on the block. What used to be an impenetrable, mystical realm for millionaires and lifelong anime nerds, is now every Instagrammer’s wettest dream.

Ever since the post-COVID era, when the rest of the world decided to become exorbitantly expensive, Japan has become ridiculously cheap. The country is suddenly sittin…

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I recently wrote an article stating that Seven & i Holdings (7-Eleven’s parent company name) was one of the most likely buyout candidates in Japan. I must reiterate that nobody should ever buy a stock based purely on its buyout potential. If anyone can actually purchase this bloated conglomerate, it will likely be a Japanese company, as we just saw exactly what happens when a foreign entity attempts a hostile takeover.

The stock got hammered by the failed Couche-Tard takeover bid, and is now trading around the 1,900 yen mark, or a drop of about 23% from their buyout-fueled peaks.

If you ignore this M&A drama, Seven & i is basically a highly profitable Japanese convenience store chain tied to a struggling North American business. The fundamentals look really good, and it is definitely undervalued on today’s earnings, but is the future rosy enough to make this stock a buy?

Executive Summary

Following the format of a Mizuho Securities Equity Research Executive Summary, here is the reality of the situation (please tell me if you enjoy it or not):

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It is June 2026, and the financial laws of gravity are completely breaking down across two different hemispheres.

The US stock market has reached valuations that defy all historical sanity. The S&P 500 is currently sitting at a massive 41.6 on the Shiller P/E. As a refresher, this metric smooths out the normal ups and downs of the economy by looking at ten years of profits instead of just one. In plain English, a 41.6 ratio means investors are paying nearly $42 today for every $1 of profit those companies averaged over the last decade.

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To understand how insane that is, you have to look at 140 years of market data. The current valuation is more than twice the long-run historical average of 17.3. We have officially blown past the infamous 1929 peak of 32.6, which preceded the Great Depression. We even crushed the post-pandemic stimulus peak of 38.6. There is only one single moment in the entire history of American capitalism when stocks were more expensive than they are today. That was December 1999, right at the peak of the dot-com bubble, when the Shiller P/E hit 44.19.

Meanwhile, over in Japan, I am seeing a totally different milestone. The Nikkei 225 just broke 65,000 and hit an intraday all-time high of 66,428.81 in late May 2026. Japan spent over three decades trapped in the shadow of its own legendary crash. But unlike the current American market, Japan’s rally is not built on speculative AI euphoria. Japan’s CAPE ratio (Shiller P/E) is sitting at a quite reasonable 29.38. That is elevated globally, but it is nothing like the hallucinatory valuations Japan saw during its 1989 ultra-bubble, when their CAPE approached 100.

The American AI bubble is delusional

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Prime Minister Sanae Takaichi secured a massive supermajority in the February 2026 elections by reading the room.

Her winning message?

Revitalize the economy, strengthen national defense, and above all, enforce a hard cap on immigration.

This bears an eerie resemblance to "Sakoku 2.0", a term popularized during the Covid-19 pandemic referencing Japan's historical era of absolute national isolation.

This policy is fiercely contested globally. For one of the most rapidly shrinking countries on earth, embracing immigration seems essential for economic survival.

But what do the Japanese people think?

So far, they seem to love it!

This might sound strange in a country where basically everyone is aware that they will face a catastrophic labor shortage of 11 million workers by 2040.

People in favor of restricting immigration in Japan argue that Japan will survive this demographic collapse without mass immigration by simply automate everything. In fact, the government themselves claims Japan will capture 30 percent of the global market for physical AI by 2040, seamlessly deploying robots into nursing homes, restaurants, farms and construction sites.

I find this techno-utopian fantasy completely unrealistic.

Sure, Japan boasts incredible hardware engineering, but the country is notoriously terrible at software adoption and administrative modernization. Furthermore, Japan’s robotics leadership is actively slipping. The industry is shifting from rigid industrial arms to general-purpose robots powered by advanced AI, and Japan currently trails both the United States and China in key research and component production. We are not going to see 11 million humanoid robots walking the streets of Tokyo and Osaka to save the economy.

But maybe an economic fallout for curbing immigration is a price worth paying?

Many of you probably agree with Japan's hardline stance on immigration. Watching the disruption caused by mass migration across the West, Japan appears to be actively avoiding the same pitfalls. I see this view all the time on X and in my own comment section, and frankly, I agree there is merit to tightening the borders.

But a strict zero-immigration policy collides with one terrifying reality: No country in history has successfully reversed a falling fertility rate, and Japan shows zero signs of breaking that trend. Without immigration, a rapidly shrinking population is a mathematical certainty.

This leads to two massive issues for Japan:

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First, Japan’s insane national debt and its failing public pension system.

This is the structural elephant in the room. Japan’s dependency ratio (the number of retirees aged 65 and above compared to working-age people) is rising sharply. It will hit 60% by the early 2030s and a staggering 80% before 2050. You have a rapidly shrinking pool of workers funding a massive, aging cohort.

Without a massive influx of immigrant tax money to prop up the system, the government is executing a strategy of managed financial retreat. The state has already introduced a “macroeconomic slide” formula. This mechanism automatically keeps pension increases below wage growth and inflation, effectively cutting benefits over time. By 2040, the average pension level will be slashed by approximately 20 percent.

Because of this, we are staring down the barrel of widespread elderly poverty. Elderly households already constitute the largest category of public assistance recipients in the country. To stabilize national finances without immigrants, some academic models suggest the government would need to push the consumption tax to an impossible 40-50%. Since that is political suicide, the state will likely monetize the debt. This will trigger inflation that further erodes the purchasing power of fixed-income retirees. The government will simply force the elderly to work well into their 70s out of sheer survival necessity.

Second, a massive emptying out of Japan.

We are going to witness the death of the Japanese countryside.

According to the influential Masuda Report, without immigration, nearly half of all municipalities in Japan are at risk of vanishing entirely by 2040. By 2050, roughly 20% of regional areas could lose all of their inhabitants. Places like Akita, Aomori, and Kochi will see their populations plummet by over 30%.

As local tax bases evaporate, regional governments will go bankrupt. They will lose the ability to maintain roads, water systems, and power grids. The only rational response for young people is to pack up and abandon these areas.

If there is one silver lining, if you can call it that, it is that major cities in Japan will see a “population boom”, as the young people are abandoning their rural communities. The population will condense into a few highly efficient mega-cities like Tokyo and a handful of regional survivor hubs.

There is hope

However, some smaller cities are already countering this trend using the "compact city" model, with Toyama City serving as a highly successful prototype.

These survivor cities will be dense and hyper-concentrated around major public transit stations. The government will deliberately pull funding from sprawling suburbs and force residents into these walkable urban cores to drastically reduce the cost of delivering public services.

Is it a great solution? No, but it might be the only way for smaller cities in Japan to survive.

How will Japanese companies survive the labor shortage?

In the corporate world, I think I have a bit of a unique take now with the AI being so prevalent.

The return of the salaryman

I think we’ll see a resurgence of the traditional Japanese “salaryman,” heavily augmented by AI.

Artificial intelligence currently replaces specific tasks rather than entire jobs. The software is jagged. It excels at some things and fails spectacularly at others. This means companies cannot just fire their accounting departments and buy an algorithm.

Instead, large corporations will hire human generalists, something Japan Inc loves to do already. Their entire job will be to supervise flawed AI outputs, plug operational gaps, and physically intervene when the software inevitably breaks. Because these workers accumulate deep, firm-specific knowledge about how their particular company’s AI systems operate, they will become highly valuable assets. Japan’s cultural comfort with lifetime employment makes it uniquely suited for this specific kind of generalist labor market.

There will be no silver bullet for the workforce deficit

But augmenting office workers only solves part of the equation. What about the millions of missing physical laborers, service workers, and rural producers?

Take agriculture.

The average Japanese farmer is already pushing 70 years old. Without the controversial foreign trainee programs that previously funneled cheap labor into rural areas, domestic food production is going to crater. We will likely see a liberalization of farming laws which will result in the death of the small family farm, replaced by automated corporate agribusinesses, but overall, Japan’s food self-sufficiency will plummet.

Zombie companies will be replaced be monopolies

In the broader economy, the brutal truth is that thousands of companies simply won’t survive, but this might not be such a bad thing at first glance.

Japan is notorious for its zombie companies, unproductive, inefficient small-to-medium enterprises kept on life support for decades by zero-interest loans and government subsidies. Without an underclass of cheap, imported labor to exploit, these businesses will go bankrupt en masse.

This will lead to an era of ruthless hyper-consolidation. As the zombies die, the surviving workforce will be absorbed by a few large, capital-rich corporations.

On the bright side, because these mega-corps will be fighting to the death over a shrinking pool of available workers, we are going to see a massive spike in wages. The era of stagnant Japanese paychecks will end out of sheer demographic desperation.

Paradoxically, this hyper-consolidation means Japan’s stock market could actually boom. As the Nikkei giants absorb the market share of thousands of dead small businesses, corporate profits at the top will concentrate. We are looking at a starkly two-tiered economy: Aggregate GDP will shrink, but the remaining mega-corps will become wildly profitable monopolies.

But this wage growth and market concentration triggers a debt bomb. Rising wages mean sticky inflation. To fight that inflation, the Bank of Japan will have to raise interest rates. And when interest rates rise in a country with a national debt over 250% of its GDP, the government’s debt servicing costs will go fully parabolic.

The surviving monopolies will be the only ones able to afford to invest in the AI, automation, and higher wages required to keep operating. For the everyday consumer, this means the death of hyper-convenience. 24/7 convenience stores will slash their hours. Next-day delivery will become a premium luxury.

The inconvenient truth is that without migration, companies won’t magically replace 11 million workers; they will simply force consumers to accept less, while squeezing maximum productivity out of their remaining, AI-augmented human generalists.

Ultimately

If Japan actually locks the door on immigration, the result is a fascinating contradiction: the stock market will boom while the actual economy shrinks. As millions of workers vanish, thousands of small businesses will simply die off, leaving the surviving mega-corporations to scoop up all their customers and become wildly profitable.

But the stock market’s win is the everyday consumer's loss. For the average Japanese citizen, the legendary era of cheap, flawless convenience is over. They are going to wake up in a drastically more expensive country where basic services cost a premium, everything closes early, and the bill for a shrinking nation is paid entirely out of their own pockets.

Conclusion

If the Takaichi administration actually means what it says about immigration, they are making a massive trade-off. They are choosing social cohesion over economic growth. They are willing to accept a smaller economy, strained pensions, and dead rural towns as the price for keeping their core cities safe, clean, and culturally familiar.

I think this is the ultimate macroeconomic experiment of the 21st century.

Japan is proving that a modern society can look at the social fragmentation happening abroad and simply say no. They are choosing to manage their own decline, becoming smaller, older, and poorer on paper, to protect their way of life. The transition will be brutal, defined by vanishing services, soaring taxes, and empty neighborhoods. Ultimately, the everyday citizen will have to look around at this shrinking, expensive new reality and ask themselves a very uncomfortable question:

Sources:

• National Institute of Population and Social Security Research (IPSS) - Population Projections for Japan: This report outlines the official demographic forecasts, projecting a 30% population decrease and an elderly population of around 40% by 2070.

  • Link: https://www.ipss.go.jp/pp-zenkoku/j/zenkoku2023/pp2023e_Summary.pdf

• Immigration Services Agency of Japan - Statistics on Foreign Residents: These official government press releases contain the data showing that the number of foreign residents recently surpassed 4 million, largely driven by new worker visa programs.

  • Link: https://www.moj.go.jp/isa/publications/press/13_00062.html

• OECD - Recruiting Immigrant Workers: Japan 2024: This comprehensive international review examines how Japan has altered its long-standing migration policies to recruit foreign workers in response to severe, widespread labor shortages.

  • Link: https://www.oecd.org/en/publications/recruiting-immigrant-workers-japan-2024_0e5a10e3-en.html

• Japan Institute for Labour Policy and Training (JILPT): This government-affiliated agency provides extensive English-language research reports detailing Japan’s acute labor shortages and the emerging impact of AI on domestic employment practices.

  • Link: https://www.jil.go.jp/english/

• Recruit Works Institute - Future Predictions 2040 in Japan: This report details the demographic simulation predicting a structural labor shortage of 11 million workers across Japan by 2040.

  • Link: https://www.works-i.com/english/item/FuturePredictions2040_JP.pdf

• Global Market Insights / METI - Physical AI Strategy: Outlines the Japanese government’s strategic target to capture 30 percent of the global market for physical AI and robotics by 2040 to offset the workforce deficit.

  • Link: https://www.indexbox.io/blog/japan-aims-for-30-of-global-physical-ai-market-by-2040/

• Japan Policy Council / Population Strategy Council (Masuda Report): These reports provide the demographic projections showing that nearly half of all municipalities in Japan are at risk of vanishing entirely due to population collapse.

  • Link: https://isvd.or.jp/en/columns/local-government-extinction-structure

• World Bank - Toyama City Compact City Case Study: A comprehensive international review of Toyama City’s successful urban redesign to adapt to a shrinking and aging population using the compact city model.

  • Link: https://documents1.worldbank.org/curated/en/113011604996380368/pdf/Toyama-City-Compact-City-Development.pdf

• Mitsubishi Research Institute & Ministry of Finance - Pension Projections: These analyses provide economic estimates on Japan’s dependency ratio, the impact of the macroeconomic slide, and the projected reductions in public pension benefits.

  • Link: https://www.mri.co.jp/en/knowledge/article/202409_1.html

I used my super duper bullet proof value investing screener in LSEG Workspace (the Bloomberg terminal for poorer people 🥲) to find the most interesting value investing case right now on a quite frothily valued Japanese stock market. The Nikkei 225 index just breached the 65,000 mark for the first time in May 2026, and everyone on the street is losing their collective minds over semiconductor stocks and AI hype.

My Super Duper Japanese Stock Screener

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After a lot of digging, I found a weird anomaly in the screener I first couldn’t believe, a gaming company with growing profits, one of the highest margins in the industry, and yet valued at P/E<11x.

On the surface, Koei Tecmo Holdings (3635) make video games about historical warlords hitting thousands of peasants with giant swords. Under the hood, they are a hyper-aggressive hedge fund wrapped in a digital entertainment publisher’s trench coat.

Every analyst covering Koei values the company strictly on software sales and gaming projections. But they completely miss that the company makes more money from massive offshore trades run by its legendary 77-year-old Chairwoman Emeritus than from its entire video game portfolio!

The market is pricing Koei Tecmo as a mediocre software developer, entirely missing the fact that it is the most fascinating corporate structure in Japan right now.

Executive Summary

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The numbers are so large they almost lose their meaning. We are looking at a nominal gross domestic product of roughly 665 trillion yen as of 2025, stacked against a gross government debt of 1,342 trillion yen. Depending on the metric, the government debt-to-GDP ratio sits between 230% and a …

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Buying companies because you think they will be bought out is a fool’s errand, and I don’t recommend anyone doing it!

With that said, with the Japanese yen so cheap it’s basically free for foreigners to travel here, buying out Japanese assets have become the hottest trend in financial markets. Also, it’s a favorite pastime of mine to speculate on what companies will be bought out from the Japanese stock market.

I know you, my fellow fans, love to pick my brain on this question. Therefore, I have concocted the five companies that are most heavily target for a buyout this year:

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It takes a profound lack of self-awareness for a politician to govern over three decades of wage stagnation and then act shocked when young people stop spending money.

During a recent Diet session, Finance Minister Satsuki Katayama clutched her pearls over a newly coined phenomenon sweeping the nation: NISA Poverty (NISA貧乏).

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You are reading this because you looked at Nintendo’s stock chart recently and felt your stomach drop into your shoes. The stock has been tumbling in early 2026, plummeting nearly 40% year-to-date to close at an ugly ¥7,667 following the latest earnings report. And now it’s down another 8% since then!

Naturally, you might assume the big, bad hedge funds are shorting it into oblivion.

In fact, the short interest ratio is practically non-existent. The short interest volume actually plummeted by 43.5% in March. Borrow rates for short sellers are hovering between a measly 1.01% and 4.08%. If hedge funds were aggressively betting against Mario, those borrow fees would be skyrocketing.

So, if the shorts are not killing Nintendo, what is?

First, Switch 2 hardware momentum is sluggish. Sales hit 2.49 million units in the March quarter, causing Wall Street to sweat. Second, memory component costs and tariffs are squeezing the company, prompting Nintendo to officially forecast a 100 billion JPY hit to their cost of goods sold. Finally, Wall Street is terrified of a Google AI model called Genie 3 that supposedly makes game developers obsolete.

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But is the market right, or are we seeing the greatest Nintendo undervaluation of the century?

Below, I analyze every bear case driving this sell-off to assess the stock's current investment potential:

The Fake Bear Cases:

Nintendo Switch 2 is a bust?

Currently, the narrative is turning sour because of the Switch 2 transition. The original Switch is long in the tooth. Sales are naturally declining.

The Switch 2 has launched, but the early sales figures are not meeting the hyper-optimistic Wall Street expectations. The company cut their production target from 6 million to 4 million units for the quarter. This caused weak-handed retail investors to panic and sell.

Adding fuel to the fire is Google DeepMind’s Project Genie 3. This AI model can supposedly generate playable video game worlds from simple text prompts in real-time. Tech journalists are screaming that the 200 billion USD gaming industry is dead.

Gaming stocks plunged as a result. Unity software dropped 35%. Nintendo caught the contagion and saw its stock drop 4.75% in a single session.

It’s a weird feeling of deja-vu when I hear this… People claimed mobile games would kill console gaming a decade ago. Nintendo responded by releasing the Switch and selling over 140 million units.

The current panic over the Switch 2 transition is entirely predictable. Every single time Nintendo launches a new console, analysts predict doom. They did it with the DS, they did it with the Wii, and they did it with the original Switch.

AI will make Nintendo obsolete

This is the most widely discussed risk, and it is also the stupidest. In January 2026, Google DeepMind released Project Genie 3. The market completely lost its mind over a tech demo.

• The Tech: Genie 3 generates real-time, navigable 3D environments from text or image prompts.

• The Specs: It outputs at 720p resolution and 24 frames per second.

• The Features: It allows basic interactive physics, like jumping and swimming.

Why pay hundreds of developers for five years to build a Zelda game when an AI can generate one in five seconds? Gaming stocks nose-dived across the board.

Unity dropped 35% in a single day. Analysts downgraded the entire sector, claiming high-fidelity interactive content generation would erode the AAA studio moat. Even major Korean publishers like NCSoft had to release statements defending their business models.

Let me explain why this is pure, unadulterated garbage. Genie 3 generates visual environments, not video games. A video game is not just a landscape you walk around in aimlessly.

A Nintendo game is defined by meticulous, obsessively tuned gameplay loops. It is the exact friction of Mario’s jump. It is the perfectly balanced level design of a Mario Kart track.

An AI hallucinating a pixelated forest cannot replicate the intentionality of Shigeru Miyamoto’s level design. Genie 3 struggles heavily with multi-agent scenarios and lacks full gameplay features. It is a prototyping tool, not a game engine replacement.

Furthermore, Nintendo sells characters, not pixels. People do not want to play “Generic AI Platformer 7.” They want to play as Mario.

AI cannot generate copyrighted intellectual property without facing a nuclear lawsuit from Nintendo’s legal team. The market is conflating the automation of background asset generation with the obsolescence of creative game design. It is a fundamental misunderstanding of the industry.

Competition is killing Nintendo?

Let us compare Nintendo directly to its closest peers. Look at Sony Group Corporation (6758.T). Sony is an incredible company, but their gaming strategy is fundamentally different from Nintendo’s.

Sony focuses heavily on the hardcore, premium audience. They build massive, hyper-expensive machines like the PlayStation 5 Pro. They rely on bleeding-edge graphics to sell their products.

This is a dangerous game. It requires massive capital expenditures. It also puts them in direct competition with high-end PC gaming and Microsoft’s Xbox.

Sony’s financial metrics actually reflect a highly successful, albeit different, strategy. Following the spin-off of Sony Financial Group in October 2025, their balance sheet is pristine. They sit on roughly 2.09 trillion JPY in cash against 1.03 trillion JPY in debt, operating with a robust net cash position.

Their Game and Network Services division is also massively profitable. It pulled in a record 140.8 billion JPY in operating income during Q3 FY2025. However, Sony remains a massive conglomerate relying heavily on third-party software and bleeding-edge hardware.

Nintendo does not play this game. They focus on the mass market and casual gamers. You do not buy a Nintendo console for the graphics.

You buy a Nintendo console because it is the only legal way on earth to play Mario, Zelda, and Pokemon. That is the moat. Their intellectual property is impenetrable.

You can have all the processing power in the world, but if your kid wants to play Mario Kart, you are buying a Nintendo. This gives them incredible pricing power. Nintendo rarely discounts their first-party games, even years after release.

Furthermore, Nintendo is actively expanding beyond video games. They are finally monetizing their IP in the broader entertainment world. They launched The Super Mario Galaxy Movie globally on April 1, 2026, and it generated a staggering worldwide box-office gross of over $800 million USD in its first four weeks. They also have a live-action Legend of Zelda movie slated for May 2027.

This creates a self-sustaining flywheel. You watch the Mario movie. You buy the Mario game.

You visit the Super Nintendo World theme park. You buy the plush toy. Every piece of media feeds into the core software business.

Competitors simply cannot replicate this. Microsoft can buy Activision Blizzard for 69 billion USD, but they cannot buy cultural relevance. Master Chief does not sell theme park tickets like Mario does.

You might argue that Microsoft bought cultural relevance when they acquired Minecraft. You are completely right that Minecraft is a global phenomenon. However, Microsoft never figured out how to connect Minecraft to them, because there is no synergy between them and Minecraft.

So you end up with even Nintendo’s richest competitor failing to become a threat. Master Chief does not sell theme park tickets, and Steve from Minecraft does not force anyone to buy an Xbox.

This is the ultimate competitive advantage.

Nintendo’s finances are weak?

At first sight, this sounds absurd. In the fiscal year ended March 2026, Nintendo’s net sales absolutely exploded by 98.6% year-over-year to 2,313.0 billion JPY. Operating profit jumped 27.5% to 360.1 billion JPY.

However, Wall Street fixated on the profitability ratios. Because hardware made up a massive 66.7% of sales, Nintendo’s gross profit ratio cratered from 61.0% down to 39.3%. Operating profit margins also compressed severely from 24.3% down to 15.6%.

But look at the balance sheet. Nintendo is sitting on a war chest of 1,791.8 billion JPY in cash and deposits. They completed a share buyback in March 2026, acquiring and canceling 11.43 million treasury shares for 99.9 billion JPY. While this is a drop in the bucket compared to their total reserves, this massive cash position puts a hard floor on the stock price.

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The Genuine Threats:

Too expensive to make the Switch 2?

This is the most legitimate threat to Nintendo’s short-term profitability. The bill of materials for the Switch 2 is skyrocketing. It is a genuine headache for management.

• DRAM Costs: The 12GB LPDDR5X modules used in the Switch 2 have seen a massive 41% price increase this quarter.

• NAND Costs: The 256GB NAND flash storage has risen by roughly 8%.

The bill of materials for the Switch 2 is skyrocketing. Nintendo officially warned that rising component prices, particularly for memory, and US tariff measures will slap an approximate 100.0 billion JPY impact onto their cost of goods sold for the coming year. Morgan Stanley analysts actually believe this 100 billion JPY estimate is too conservative given the expected surge in DRAM and NAND pricing.

Nintendo’s entire hardware philosophy relies on using cheap, commoditized components. This sudden spike in memory pricing destroys their hardware margins. They are used to making a profit on day one, not taking a loss like Sony or Microsoft.

And they are sticking to that strategy. They are raising prices:

This is a risky move. Morgan Stanley warned that this price increase, combined with already sluggish Q4 momentum, warrants a cautious view on the pace of Switch 2 adoption. Raising prices mid-launch-window alienates the core casual audience.

Sure, this might slow down Switch 2 adoption, but this is still the cheapest console you can buy.

No good games?

The Switch 2 needs killer games to move hardware. Right now, the visibility is incredibly murky.

• Pokemon Pokopia: Estimated 3.5 million shipments in Q4, performing well but needs to hold momentum.

• Mario Kart World: Rapid shipment deceleration, with UBS predicting only 1.5 million shipments in Q4.

• Upcoming Exclusives: Pokemon Winds & Waves is not slated until 2027.

If Nintendo does not announce a massive lineup of first-party titles soon, hardware sales will stagnate. Investors are desperately waiting for the next Nintendo Direct presentation. They need to see titles like the new 3D Mario or the rumored Fire Emblem: Fortune’s Weave.

Sure, they now have Yoshi and the Mysterious Book slated for May 2026 , Star Fox arriving in June 2026 , and Splatoon Raiders scheduled for July 2026. But again, none of these titles are enough to truly make the Switch 2 a must have console.

A weak pipeline is the fastest way to kill a console launch. The Wii U failed largely because of software droughts. If Nintendo repeats that mistake, the stock will bleed further.

Conclusion: Buying the Panic

In this analysis, I have established that the short sellers are practically non-existent. I have also established that Google’s Genie 3 is a hallucinating prototype, not a replacement for creative game design. The true headwinds are entirely cyclical, stemming from elevated RAM costs and the bold, risky decision to jack up the retail price of the Switch 2 to protect margins.

Wall Street is notorious for punishing cyclical transition years in the hardware business. They are completely ignoring the fact that a massive portion of Nintendo’s market capitalization is just cash sitting in a vault.

When you back out the 1,791.8 billion JPY in cash and deposits, you are buying the core operating business at a steep discount. You are buying a premier entertainment monopoly that owns the childhoods of multiple generations. You are paying a discounted multiple for Mario, Zelda, and a business model that captures margin at every single step.

This is the essence of value investing. You buy a phenomenal business when temporary friction causes weak-handed investors to panic. The margin of safety is built entirely on that cash pile and the unbreakable strength of their intellectual property.

I do not care if memory prices force retail price hikes and compress adoption for a quarter or two. I care about the recurring software revenue and console adoption over the next decade. Buy the dip, collect the 219 yen dividend, and wait for the market to wake up to reality.