Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

Investing in Japan: Is There Light at the End of the Tunnel?

Stock-Markets / Japanese Stock Market May 30, 2012 - 11:20 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleMartin Hutchinson writes: Most people have given up on investing in Japan.

With an aging population and far too much government debt, the conventional wisdom is that Japan will never again see the vigorous economic growth it once enjoyed.


The earthquake and tsunami of March 2011 only reinforced this view. However, that tragic episode did have another side.

It showed the resilience and discipline of Japanese society.

There was almost no looting, for example -- and recent economic data suggest that the Japanese economy is not as dead as it seemed.

First quarter Japanese gross domestic product (GDP) came in at an annual growth rate of 4.1% --far higher than the United States, Canada, Australia, or anywhere in the Eurozone.

Given that Japan has been in perpetual near-recession for 21 years, with no surges of productivity like the U.S. enjoyed in the late 1990s, it's really not a bad performance.

You can also see Japan's true strength from its exchange rate, which is currently 79 yen to the dollar, up from around 120 five years ago. That makes visiting Tokyo very expensive.

However, it's also sign of a highly competitive economy.

Investing in Japan: What You Need to Know
It's notable that observers in the United States, a country which perpetually runs payment deficits of $500 billion-$600 billion annually, sneer at the economies of Japan and Germany, which are almost always in surplus.

Before 1995, I lived in another economy that was similar. Britain ran deficits much like the U.S. does.

So believe me when I tell you, deficits are not exactly a sign of superior economic health.

The reality is that Japanese and German products and services are highly competitive, both in advanced economies and in emerging markets. Conversely, U.S. exports are not as competitive except in a few sectors.

Even so, the Japanese stock market is still trading at less than a third of its 1990 peak.

However, that's no longer something to sneer at since the S&P 500 is also trading well below its 2000 peak.

The reality is that speculative bubbles such as that in Japanese stocks and real estate in the 1980s and U.S. stocks in the 1990s and housing in the 2000s are enormously damaging. The after-effects can last for years, or even decades.

Truly Alan Greenspan, Ben Bernanke and their 1980s Japanese counterparts have a lot to answer for.

These quasi-politicians at central banks should not be allowed to play games with the money supply. Rather, they ought to adopt an automatic system such as a gold standard.

Of course, it's all very well quoting the superior returns over the long term from equity investments. But the truth is, we have finite lifespans.

An investment in the U.S that loses money for 12 years and counting -- or 22 years and counting in Japan -- is not very attractive as a means of saving for retirement (unless you're 25).

Nevertheless, while the tunnel may be a long one, it is not an infinite one. Today in Japan there are signs we may be emerging from the other end.

Robust growth is the means by which both Japan and eventually the U.S. will emerge, which will reduce the excessive debt levels in the system and allow equity and other asset values to start increasing again.

Naturally, the politicians have to stop running huge deficits in order for this to happen, but in Japan this may finally be happening, with the government proposing to double the consumption tax to 10% in two stages by 2015.

Two Ways to Invest in Japan
Since Japan's export sector is hampered by its high exchange rate, the best Japanese investment would focus on the smaller companies. Such companies benefit from domestic growth and are themselves suppliers to the export giants.

The SPDR Russell/Nomura Japan smaller companies ETF (NYSE: JSC), for example, has now been running since 2006 and has an expense ratio of a modest 0.56%. It looks to be an excellent way to tap into Japanese small company growth.

Alternatively, you should consider investing in the Japanese financial sector, which has major growth opportunities in Asia and has avoided many of the problems of the 2008 meltdown.

In this area the best-capitalized company is Orix Corporation (NYSE: IX).

Orix, originally a leasing specialist, has expanded into most sectors of commercial and investment banking, with an emphasis on investment rather than trading. It has capital of around 15% of assets -- nearly double the capitalization ratio of most banks, in Japan or elsewhere.

What's more, Orix is trading on a P/E ratio of around 10 and at 53% of book value. For Japanese-minded investors it's also a bargain.

After a long downturn, Japan is poised to rebound. The conventional wisdom, as is often the case, is wrong.

Source :http://moneymorning.com/2012/05/30/investing-in-japan-is-there-light-at-the-end-of-the-tunnel/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife