Slices of Japanese business, politics and life
While Japan took few direct hits in the global credit crisis, the aftershocks have been immense, and long-lasting. The United States and Europe may now be showing some signs of recovery, but the world’s second-largest economy is still straggling behind and gasping for air.
Predictably, equity markets reflect Japan’s wheezy struggle. The Nikkei 225 is the worst performer among the benchmark indexes of the G7 nations, up just 10 percent so far this year. (The best performer, by the way, is Toronto at nearly 27 percent. The Dow has posted a respectable 17 percent return.)
Some discrepancy between Japan and other advanced industrialised nations is to be expected. Tokyo’s top companies are largely exporters reliant on the United States, where consumer spending has been whiplashed by the recession. A resurgent yen, which drives up the price of Japanese goods overseas, hasn’t helped either.
Consumer spending in Japan — which never convincingly recovered from the crash of the asset bubble in the early 1990s — is only poised to get worse, thanks to the lethal demographic cocktail of an ageing population and a shrinking birthrate.
Britain's Association of Investment Companies has UK investors who run Japanese equity funds whether they think the general election on Sunday will have a positive impact on the country, which is slowly emerging from recession.
Their answers can be found here, but the consensus was that the Democratic Party of Japan would defeat the ruling Liberal Democrat Party and that this would result in more consumer friendly policy or economic revival through higher living standards.
from Summit Notebook:
Japan is edging towards the introduction of independent directors and auditors for publicly listed companies, but so far even the idea of having someone from outside at the top of a company remains a foreign concept.
The tradition is for someone to join a Japanese company at age 22 with the ultimate goal of serving on the company board, says Takeyuki Ishida, the head of Japan Research at RiskMetrics Group, which advises institutional investors on how to vote their shares.
Shares of Japanese banks have taken such a kicking lately that one wonders if they’ll ever be able to walk straight again. Tokyo’s index of bank stocks has dropped 18 percent so far this year, on top of a 43 percent drubbing in 2008.
While not the spectacular decline and fall of a Bear Stearns or a Lehman Brothers, the stock slide is significant because Japan’s banks have little subprime exposure, relatively healthy balance sheets and fairly bouyant core profits.
The yen’s fall against the dollar the past few weeks has been remarkably fast, and calculated from where it is now around 97.70 yen, the dollar has jumped nearly 9 percent this month, on track for its biggest such gain since August 1995.
The yen surged last year as the worsening financial crisis forced investors to unwind risky carry trades – meaning they had to buy lots of yen – under the belief that Japan’s economy and banks were holding up through the storm.
from Global Investing:
Reuters released its February asset allocation polls today, showing an ever so slight increase in average holdings of stocks. The signficiance, however, was not in the small increase but in the fact that there was no decrease. February has not been kind to riskier investments, with a drumbeat of poor economic news combining with new fears about banks to send global stocks to fresh six-year lows.
Dig inside the various polls -- they come from the United States, Britain, Japan and continental Europe -- and you find different moods. Three-quarters of U.S. managers polled, for example, made no change at all in their allocations over the month. Europeans, meanwhile, are so gun shy that they are holding more than twice as much cash as their long-term average. Japanese investors were a bit more optimistic than a month earlier, apparently because fears of deep trouble in China are easing.