Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Defeat of the Shadow Shogun, Means It's Time to Buy Japanese Stocks

Stock-Markets / Japanese Stock Market Sep 17, 2010 - 06:14 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleMartin Hutchinson writes: Japanese Prime Minister Naoto Kan's narrow Tuesday victory over Ichiro Ozawa for the leadership of the Democratic Party of Japan wouldn't normally get investor pulses racing - after all Japan has had five prime ministers in four years.

However, the Bank of Japan's heavy intervention in the currency markets this week confirmed my view that this political twitch was really very different.


The upshot: As investors, we should pay attention ... and should look to increase our allocation to Japanese stocks.

Big Spenders No More
Ozawa, known as the "Shadow Shogun," was originally a powerful politician in the Liberal Democratic Party that dominated Japanese politics for 55 years. He split with the LDP in 1993, reformed the opposition and became the power behind the DPJ. He served as the DPJ's secretary general from 2006 to 2009, although he was forced by scandal to resign before its election victory in September 2009.

The reason we should pay attention is that Ozawa's defeat may end the dominance of the big-spending interests in Japanese politics and allow Kan to get down to the hard work of correcting Japan's deficit and debt problem. This will take several years, but even in the short term may result in faster growth for the Japanese economy and - interesting to us as investors - the final end of the 20-year bear market in Japanese stocks.

You see, Ozawa earned his "Shadow Shogun" nickname for his arm-twisting, backroom deals. He used his power to promote Japanese infrastructure spending, forming alliances with the big construction companies that funded his own political career, as well as the careers of those around him.

This "cash splash" philosophy has been a big problem for the Japanese budget and its growing debt. Ever since Japan's stock-and-real-estate bubble burst in 1990, leader after leader has attempted to prop up the economy with major infrastructure spending.

The only exception was the short (2001-2006) stretch under then-Prime Minister Junichiro Koizumi, when the spending flow was cut back and some attempt was made to balance the budget.

Alas, this budgetary enlightenment wasn't to last.

When the global financial crisis struck in 2008, Japan - like other countries - resorted to repeated "stimulus" initiatives, which is finance-speak for infrastructure spending. The result has been an inexorable climb in Japan's debt load, which this year reached 217% of gross domestic product (GDP).

At that level, something has to give. Only twice in world history - Britain after 1815 and again after 1945 - has a country with a higher debt level managed to bring it down without default.

According to the National Bureau of Economic Research (NBER), public-debt levels that reach or exceed 90% of GDP become highly problematic. And a recent research study - conducted by economists Kenneth S. Rogoff of Harvard and Carmen M. Reinhart of the University of Maryland - found that for countries with debt-to-GDP ratios "above 90%, median growth rates fall by 1%, and average growth falls considerably more."

The Wrath of Kan
Kan, who took office in June, realized that policies had to change, but was damaged by DPJ losses in July's upper house elections. And when he refused to resort to the same sort of backroom wheeling-and-dealing that had been the hallmark of "Shadow Shogun" politics, Ozawa challenged him for the party's leadership.

The Tuesday (Sept. 14) election was the showdown between Ozawa and Kan.

Having seen off Ozawa, Kan should now have a reasonable run of power in which he can take steps to repair Japan's economy. And it's pretty clear what those steps need to be.

Public spending needs to be cut back, so that the budget can be reduced, preferably without large increases in taxes. At the same time, the danger of deflation - made worse by a steadily rising yen (which reduces Japanese exports by making them more expensive, even as it reduces the prices of imports) - must be fought off.

The Bank of Japan (BOJ), following Kan's instructions, achieved progress on this front on Wednesday (Sept. 15): It intervened heavily in the foreign-exchange market, first in Tokyo, and then - when it opened - in New York.

One estimate puts the BOJ's first-day intervention at $11.6 billion. The intervention pushed the Japanese yen down by more than 3% against the U.S. dollar. That will help Japanese exporters - and at the same time will limit deflationary forces in Japan's domestic economy.

All of that, in turn, should give Kan some room for budget cuts.

The Tokyo stock market reacted favorably, rising more than 2% on the news of intervention. By Japanese standards, it's currently very cheap, at less than 25% of its 1990 value and it remains near the bottom of its trading range since 2000. It has bounced little since its bottom last year, unlike other global markets.

Thus, Japan's stock market currently appears to have better rebound prospects than many other markets around the world. So if you haven't got any money in Japanese stocks, you should probably boost your allocation.

Let me be clear: Even with this week's developments, Japan isn't destined to become the world's next white-hot market; given what transpired this week, I'd say my rating has shifted from 5.0 out of 10 to about 7.5 or 8.0.

Besides, Japan is still the world's third-largest economy, and its prospects seem likely to improve. And let's not forget, it is an export powerhouse in the fastest-growing region in the world - Asia.

[Editor's Note: Money Morning's Martin Hutchinson continues to make money for his readers by being right on the money with his predictions.

Just look at some of his most recent market calls. Earlier this year, just a week after Hutchinson recommended Germany, the European keystone reported much-stronger-than-expected GDP growth. He recommended Chile back in December, and three of the stocks he highlighted have posted double-digit returns - and one is up nearly 25%. He again recommended Korea - which analysts were downgrading - only to have the traditionally conservative International Monetary Fund (IMF) come out with an upgraded forecast that projects solid growth for that Asian Tiger for this year and next.

A longtime international merchant banker, Hutchinson has a nose for profits - as evidenced by his unerring ability to paint a picture of what's to come. He's able to show investors the big profit opportunities that are still over the horizon - while also warning us about the potentially ruinous pitfalls hidden just around the corner.

With his "Alpha Bulldog" investing strategy - the crux of his Permanent Wealth Investor advisory service - Hutchinson puts those global-investing instincts to good use. He's managed to combine dividends, gold and growth into a winning, but low-risk formula that has developed eye-popping returns for subscribers.

Take a moment to find out more about "Alpha-Bulldog" stocks and The Permanent Wealth Investor by just clicking here. You'll find the time well spent.]

Source : http://moneymorning.com/2010/09/17/japanese-stocks-2/

Money Morning/The Money Map Report

©2010 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 72 hours 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

© 2005-2019 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

6 Critical Money Making Rules