For most of the last 35 years, investing in Japan has been an exercise in patience, pain, and occasionally comedy.

Every few years, Wall Street would rediscover Japan. Strategists would dust off the same slides, point to low valuations, talk about reform, mention the aging population in a somber voice, and tell us that this time was different.

Then nothing much happened.

Japan stayed cheap. Corporate management stayed indifferent. Balance sheets stayed lazy. Shareholders stayed somewhere near the bottom of the priority list, just above the guy delivering copier paper. The market would rally for a while, disappoint everyone, and then go back to being the world’s most famous value trap.

That is the old Japan story.

The new Japan story is more interesting.

Corporate Governance Reform Is Real

The Tokyo Stock Exchange has been pushing companies to explain why they trade below book value and what they intend to do about it. Management teams are being forced to think about return on equity, return on invested capital, cash hoards, cross-shareholdings, buybacks, dividends, and shareholder returns. That may not sound revolutionary in the United States, but in Japan it is the financial equivalent of someone opening the curtains after a 35-year nap.

Goldman Sachs calls this Japan’s strategic awakening. The country is becoming more important geopolitically, more focused on defense, more serious about supply chain resilience, and more central to the future of semiconductors, robotics, industrial automation, shipbuilding, and advanced manufacturing. Japan is not just cheap anymore. Japan is strategically important, under-owned, and finally being pushed toward better capital allocation.

GMO makes the market case even more directly. Japan’s corporate reforms have already led to better margins, stronger earnings growth, rising shareholder returns, and better return on equity. The broad market is no longer screamingly cheap after a strong run, but Japan still trades at a meaningful discount to the United States. More important, the real opportunity remains in smaller value-oriented companies that are still cheap, underfollowed, and often ignored by global investors who prefer to own the same 10 stocks in every portfolio and call it diversification.

That brings us to the Horizon Kinetics Japan Owner Operator ETF (NASDAQ:JAPN).

Most “Japan” Funds Aren’t Really Japan

JAPN is not another broad Japan index fund. That is the whole point.

Most investors who buy Japan through the big ETFs think they are getting exposure to Japan. They are not, at least not in the way they probably think. They are getting a basket of large-cap exporters and global multinationals that happen to be headquartered in Japan.

Toyota. Sony. Mitsubishi UFJ. Hitachi. Nintendo. Tokyo Electron. Advantest.

Those are fine companies. Some are excellent businesses. That is not the issue.

The issue is exposure.

Horizon Kinetics points out that the top 10 holdings in the iShares MSCI Japan ETF (NYSE:EWJ) generate only about 33% of their revenue from Japan. The rest comes from outside Japan. Toyota gets about 22.3% of revenue from Japan. Sony gets about 17.3%. Tokyo Electron gets 7.8%. Advantest gets just 2.0%.

That is not really Japan the domestic economy. That is Japan the global export platform.

Investors looking for the impact of Japanese corporate reform, domestic consumption, local entrepreneurship, labor scarcity, automation, productivity improvement, and governance change may not capture much of that by owning the same mega-cap companies everyone else already owns.

JAPN was built to attack that problem.

Owner-Operators With Skin in the Game

The fund is actively managed. It owns Japanese companies with locally driven revenues and meaningful owner-operator leadership. Horizon Kinetics is looking for businesses run by individuals who own significant stakes in the company and are therefore aligned with shareholders. The fund seeks long-term growth of capital by investing primarily in Japanese-domiciled companies where management has industry knowledge, networks, and a direct economic incentive to compound long-term enterprise value.

There is a reason this matters in Japan.

Traditional Japanese corporate culture has often been shaped by lifetime employment, risk aversion, bureaucracy, and the desire to avoid disruption at all costs. That may be socially comfortable, but it is not always wonderful for shareholders. Large companies can ignore niche opportunities, move slowly, sit on assets, and protect old relationships long past their useful life.

Entrepreneurs do not usually have that luxury.

Japanese owner-operators can move faster. They can pursue overlooked niches. They can allocate capital more intelligently. They can build businesses around local demand and then potentially expand globally. They also have something many professional managers lack: their own money on the line.

That tends to sharpen the mind.

Horizon Kinetics argues that Japan has plenty of innovation. The country produces about 8% of global patent filings, behind China and the United States. The challenge has not been the absence of ideas. The challenge has been turning ideas, assets, intellectual property, and niche business models into shareholder value.

JAPN’s strategy is built around that opening. The fund looks for two things.

First, it wants Japanese owner-operators — companies with entrepreneurial leadership, strong capital allocation, information advantages, and incentives to maximize return on equity, return on invested capital, and shareholder returns.

Second, it wants a Japan-centric posture. The companies should have core revenue anchored in domestic demand, benefit from Japanese intellectual property and innovation, have optionality for global expansion, and be positioned to benefit from shareholder-focused regulatory and policy changes.

That is a more precise Japan thesis than simply buying the index and hoping the yen behaves.

Inside the Portfolio

As of the most recent factsheet, JAPN had 32 holdings, a weighted average market capitalization of $2.7 billion, price-to-book of 2.4 times, price-to-sales of 1.6 times, and return on equity of 20.2%. The fund’s active share was 99.4%, which means this is not one of those active funds that charges active fees to own the same stocks as the benchmark while pretending the manager is doing deep thinking in a conference room somewhere.

The top holdings included Furuno Electric, Japan Elevator Service Holdings, Resorttrust, Hikari Tsushin, Pan Pacific International Holdings, Furyu, ULS Group, M&A Capital Partners, Yonex, and Finatext Holdings. The top 10 holdings made up 47.5% of the portfolio.

That concentration is important. This is not a watered-down index product. JAPN is a concentrated active bet on a specific segment of the Japanese market.

That can work very well if the manager is right. It can also underperform badly if the manager is wrong. Nobody should pretend otherwise.

A few of the sample holdings show what Horizon Kinetics is trying to do.

Japan Elevator Service Holdings is an independent elevator maintenance and service company. It was founded in 1994 by Katsushi Ishii, who serves as founder, chairman, and CEO and owns a meaningful stake. The company is described as the only publicly listed independent elevator service operator, taking market share from large elevator manufacturers and smaller independent service providers. That is not the kind of story you get by buying the top 10 names in a Japan index fund.

Pan Pacific International Holdings operates discount stores and supermarkets. Founder and chairman Takao Yasuda owns a significant stake. The company built a retail model that combines convenience, discounting, and entertainment, while sourcing and pricing merchandise to meet local demand. That is a domestic consumer business with a differentiated model and founder influence.

IG Port is an animation production and intellectual property company. The company has built an animation IP catalog and is working to monetize that intellectual property in Japan and globally. That fits nicely with Japan’s broader cultural and intellectual property strengths. It is also the kind of niche business that index investors often miss until after the easy money has already been made.

The Fund, and the Honest Numbers

JAPN is still young. The fund launched on May 12, 2025, trades on Nasdaq, and has an expense ratio of 0.85%. Horizon Kinetics manages the ETF, with Murray Stahl, Aya Weissman, and Utako Kojima listed as portfolio managers. The firm has been managing a dedicated Asia and Japan strategy since 2008, and the portfolio team has deep experience in Japanese and Asian investing.

Short-term performance has not been exciting. As of March 31, 2026, the factsheet showed a year-to-date market price return of negative 11.91% and a NAV return of negative 13.50%. Since inception, the annualized return was negative 8.45% on market price and negative 10.54% on NAV.

That is not pretty.

It is also not decisive.

A concentrated active fund focused on smaller Japanese owner-operators is not going to move in a straight line. It is not designed for people who judge a long-term strategy by a couple of quarters and then run to the nearest mega-cap tech ETF because CNBC looked excited.

The Bottom Line

The question is not whether JAPN has had a smooth start. It has not.

The question is whether the underlying thesis makes sense.

I think it does.

Japan is changing. Slowly, unevenly, and in a very Japanese fashion, but changing nonetheless. Companies are being forced to think harder about capital efficiency. Buybacks and dividends are rising. Cross-shareholdings are coming down. Tender offers and corporate control activity are increasing. Smaller companies remain underfollowed. Domestic businesses are often ignored by global investors. The yen is cheap. The market remains far less picked over than the United States, where every fund manager on Earth is busy explaining why paying 40 times earnings for the same obvious growth story is actually conservative.

JAPN offers a way to own the part of Japan that looks most interesting to long-term value investors: founder-led, domestically rooted, underfollowed businesses that may benefit from corporate reform, local demand, better capital allocation, and eventual global expansion.

This is not a risk-free idea. The fund is concentrated. It owns smaller and mid-cap companies. It is exposed to Japan-specific risks, currency risk, active management risk, and the possibility that reform takes longer than expected. Japan has disappointed investors before. Anyone who says otherwise either has a short memory or works in marketing.

Yet the opportunity is real.

The broad Japan trade has already been discovered. The better opportunity may be underneath the index, where owner-operators are building businesses away from the spotlight. That is where JAPN is looking.

In a world where most global equity portfolios are stuffed with the same U.S. mega-cap names, JAPN provides something genuinely different. It is active. It is concentrated. It is domestically focused. It is aligned with the owner-operator philosophy. It is tied to one of the more interesting structural reform stories in the developed world.

That makes it worth serious attention.

Japan is no longer just cheap. Japan is cheap enough, improving, under-owned, and finally being forced to care about shareholders.

That is a much better story.

JAPN may be one of the cleaner ways to invest in it.