MITSUBISHI UFJ FINANCIAL GROUP INC Q4 FY2025 earnings call

• Core Investment Philosophy
  • Unexpected risks always emerge from unforeseen areas; widely discussed expected risks are not material risks. Major crises such as the COVID-19 pandemic and the Lehman Shock were entirely unpredicted before they occurred.
  • Investors should prepare for unforeseen events by holding a portion of portfolio in cash and maintaining allocations to safe haven assets like gold, rather than attempting to predict specific risks.
  • Instead of focusing on constantly changing market and macro conditions, investors should prioritize unchanging long-term fundamentals:
    • Over the long term, equities trend upward despite periodic crashes and bear markets. Over 150 years, the S&P 500 has delivered a 5% annualized return even after all major crises, with 9%+ annualized returns post-WWII. The Nikkei Average has delivered over 8.1% annualized returns over the past 10 years, matching 8% annual growth in EPS and BPS.
  • Long-term buy-and-hold investing compounding generates substantial wealth, especially when utilizing the full NISA tax exemption allowance. For young investors starting at age 30, compounding at 8% annual returns over 10 to 20 years can build very large asset positions that create greater life and career options. Hiroki does not recommend early FIRE, but notes that compounded long-term investing greatly expands choice.

No firm product segment financial performance data is provided in this market outlook discussion transcript.

• 2025 year-end target for the Nikkei Average is 45,000 yen, based on an expected EPS of 2,800 yen and an unchanged PER multiple of 16, driven by 8% annual earnings growth.
• Continues to maintain a bullish outlook for Japanese equities, consistent with prior forecasts.
• Expected 2025 to be the first ever year of 5 consecutive years of yen weakening, which supports Japanese corporate earnings given the large share of global manufacturing among Japanese firms.

• The most material risks are entirely unforeseeable and emerge from unexpected sources, so preparation rather than prediction is required.
• Political risk from the February 2025 German federal election: a strong performance by the far-right AfD, supported by Elon Musk, could create uncertainty over the future of the EU framework and trigger a global risk-off sell-off from late February to March 2025.
• Near-term uncertainty for the shipping sector from potential trade impacts of Donald Trump's tariff policies, which complicates balancing mid-term growth demand with near-term volatility.
• Prime minister change after Japanese House of Councillors elections would impact equities, as leadership changes within the LDP do not produce identical market outcomes (evidenced by the very different market performance after Shinzo Abe took office).

Q: Could the US President's order blocking the Nippon Steel-US Steel acquisition become a long-term drag on global M&A and international investment if similar cases increase?

A: Hiroki states this is a unique, rare case, not a precedent for broader trends. The decision was non-rational, driven by Biden's internal political positioning and response to Trump, not fundamental policy. It demonstrates that even top leaders in highly capitalist economies can make irrational decisions driven by emotion, and ultimately investors that make rational judgments will outperform.

Q: The Nikkei Average has failed to break through the 40,000 yen ceiling; what level would be a good buy-on-dip entry point?

A: The index has been stuck in a 38,000 yen to 40,000 yen range. A dip to the 38,000 yen zone after a test of 40,000 yen and pullback to 39,000 yen would represent a good buying opportunity.

Q: Can Japanese bank stocks break above a PBR of 1x?

A: Yes, this is possible given bank stocks currently have solid earnings. Megabanks are already in strong position, and Hiroki holds Mitsubishi UFJ, Sumitomo Mitsui, and regional Hachijuni Bank in his portfolio. Regional banks that continue to improve operations have room to rise toward 1x PBR and offer decent dividend yields, making them attractive for 2025.

Q: With rising long-term shipping demand toward 2030, are names like Mitsui E&S and Nippon Yusen buys?

A: Mitsui E&S is a separate shipbuilding play; some shipping names like Mitsui O.S.K. Lines have strong fundamentals. However, near-term trade uncertainty from Trump's tariff policies makes it hard to price the balance of mid-term growth, and post-COVID special demand distortions left valuations disconnected from fundamentals. Hiroki avoids the sector, and notes good investing focuses on bottom-up individual stock selection, not broad sector bets, which are inherently overly imprecise.