Jan
7
Take Another Look at Japan, from Jay Nelson
January 7, 2008 |
This is a country that very quietly has moved out of near-depression to having a growth rate competitive with ours for over 3 years now. And the country's performance is only going to get better relative to ours, as their investments in mobile communications, energy efficiency, miniaturization, use of MEMS technologies in robotics and smart houses, and other technologies, are really going to start paying dividends in the next three years.
There are also some big gains soon to be realized from licensing and commercializing much of their intellectual property which has to date been neglected…
Not only that, but they have $14 trillion in savings, mostly in low-yielding bank and postal accounts, that will finally begin moving into equity markets over the next decade now that this month's full deregulation of selling insurance at the bank branches becomes effective.
As soon as China hits the wall (and it will), Japan will finally get the recognition it hasn't had since the 1980s.
Full disclosure: We publish a leading management publication on Japan.
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Japan as inflation-hedge:
The exporters were never the problem in the Japanese market, and the Toyota, Canon and Nintendo of this world have displayed a very respectable performance over the years. The real issue of the japanese market is domestic-related, it’s still the biggest chunk of the index (banks, retail, consumer finance) and it has performed very poorly since the bubble bursted (with the exception of REIT, utility and transportation since 2003).
For a broad rally to take place the J-wealth effect (=f(stock-market;housing))will have to sustain its already weak momentum in Japan….not really the case currently.
One bullsih case for the world’s second largest economy can be made with “inflation”: indeed, after so 15 year of deflation Japan is probably the only major market in the world that could benefit from global inflation pickup. The weak JPY/USD trend is also a convenient way to import inflation.