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I would really like to know why Japan’s stock market is underperforming.

My conclusion: because the performance has been terrible.
Not the price performance, the business performance.

Price to book is not a perfect metric for valuing a broad index, but it's OK as a stake in the ground.
The P/B of the Topix (first section) is the same now as it was in July 2001, being 1.15. That was 17.83 years ago.
So, we can have a notion that valuation levels are comparable, and returns are measuring business progress rather than changes in valuation multiples.

The index has risen 1.79%/year since then. As multiples are about the same, the value of the index has probably risen roughly that much.
Add dividends, which are generally around 2%, to get the total return.
This is a pretty terrible return, so the Japanese market doesn't get a very high valuation multiple.
You can find better metrics of market valuation like CAPE, but they will general lead to the same conclusion.

In short, most Japanese companies have poor business economics.
The incremental returns on incrementally allocated capital are generally poor, for the simple reason that it's not generally a goal of management for that to be a high number.

Jim
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