Japanese Equity Fund

Capital at risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

The listed funds are not an exhaustive list of funds available. Visit www.funds.troweprice.com to see the full range of funds offered by T. Rowe Price, including those that consider environmental and social characteristics as part of their investment process. For up to date information regarding any T. Rowe Price fund's investment strategy, please see the relevant fund KID and prospectus.

Overview

Manager's Outlook

Japanese equities are in the middle of the road at this stage; Japan is among the most open and cyclical markets. If the global economy, and particularly the U.S., has a hard landing or tips into recession, then that will be a headwind for Japanese equities. However, the TOPIX Index is on little over 12x forward earnings when it trades on average around 14x forward earnings. Therefore, much of that bad news and negative sentiment is already reflected in valuations.

The yen has also fallen precipitously in 2022, due to the significant divergence of Japan's inflation trends and central bank policy from other developed nations. This is important for two reasons: (1) the market is very attractive for foreign investors looking for cheap assets and (2) the weak currency is supportive for Japan's exporters, which represent a large part of the TOPIX and have become around 20% more competitive in 2022. These exporters are mainly the large-cap value names, while the sluggish currency has further compounded pressure on small-cap and growth investors.

The Japanese currency is at its lowest level in around 24 years versus the U.S. dollar?we believe that we are likely to see the yen strengthening from here at some point, particularly if inflation in the U.S. starts to roll over while remaining tepid and in line with the central bank's target in Japan. We also note that the currency can move sharply; in 1998, the yen rallied by about 22% in less than three months, with about a third of the gains in over just two trading days. The currency can rally sharply from its current lows and that would be supportive for the relative performance of small-cap and growth investors who have been under pressure. Small-caps are at their biggest discount relative to large-caps since the global financial crisis?that is excessive, in our view.

Despite the uncertainty in the global economy at the moment, Japan's corporates continue to buy back stock and return capital to shareholders at record levels. This is a very encouraging sign about the health of the corporates, as well as signaling the ongoing improvement in corporate governance at the company level in Japan. We believe the relentless pressure of late creates opportunity for long-term investors.

Strategy

Fund Summary

With close proximity to, and a deep understanding of, the companies in which they invest, our Tokyo-based investment team searches for companies with a focus on growth and improvement. We favour businesses with sustainable growth, a durable competitive advantage, robust fundamentals and a credible management team. The promotion of environmental and/or social characteristics is achieved through the fund's commitment to maintain at least 10% of the value of its portfolio invested in Sustainable Investments, as defined by the SFDR. Additionally, we apply a proprietary responsible screen (exclusion list). The manager is not constrained by the fund’s benchmark, which is used for performance comparison purposes only.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Jun-2025 - Hiroshi Watanabe Portfolio Manager,

Japanese equities fell in euro terms in June. This was amid some signs that bilateral trade talks between the U.S. and Japan appeared to have stalled, as well as heightened geopolitical tensions in the Middle East exerting temporary downward pressure on riskier assets. Within the portfolio, stock selection in information technology and services benefitted relative performance. Shares of a medical human resources company soared on the announcement that it was being acquired. Among machinery names, shares of a manufacturer of oil and gas production machinery were boosted by strong first-quarter orders. Conversely, our choice of securities in the electric appliances and precision instruments sector detracted. Shares of an electronics and media conglomerate were subject to some profit-taking after strong performance, and our overweight position held back relative gains. Within construction and materials, a cement company appeared to be benefitting less from falling coal prices (a driver of its underlying costs) and issued conservative guidance.

31-Jan-2024 - Archibald Ciganer Portfolio Manager,

Within the information technology and services sector, we believe that gaming could be a top performing segment in Japan this year. Many gaming stocks struggled in 2023, on weak demand post COVID and Chinese regulatory headwinds. However, these trends appear to be reversing, with demand normalising, a good line-up of games and, recently, China’s approval of a slew of games. The share price performance of some gaming stocks has already started to improve, yet they still appear attractively valued, in our view.

Past performance is not a reliable indicator of future performance.

The Funds are sub-funds of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents and/or key information document (KID) in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the articles of incorporation and the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors. They can also be found along with a summary of investor rights in English at www.troweprice.com. The Management Company reserves the right to terminate marketing arrangements.

Hedged share classes (denoted by 'h') utilise investment techniques to mitigate currency risk between the underlying investment currency(ies) of the fund and the currency of the hedged share class. The costs of doing so will be borne by the share class and there is no guarantee that such hedging will be effective.

Before deciding to invest in the fund, you should read the offering document/prospectus (including its investment objectives, policies and any risk warnings) which are available and may be obtained from any appointed distributors.

The specific securities identified and described in this website do not represent all of the securities purchased, sold, or recommended for the sub-fund and no assumptions should be made that the securities identified and discussed were or will be profitable.

A full list of the currently issued Share Classes including Distributing, Hedged, and Accumulating Categories may be obtained, free of charge and upon request, from the registered office of the Company.

Benchmark: Investors may use the benchmark to compare the fund’s performance. The benchmark has been selected because it is similar to the investment universe used by the investment manager and therefore acts as an appropriate comparator. The investment manager is not constrained by any country, sector and/or individual security weightings relative to the benchmark and has complete freedom to invest in securities that do not form part of the benchmark.

Disclosure on Vendor Indices can be found here.

Risks

Typical Investor