Blackrock sees opportunities in shrinking Japan

July 8, 2009

Japan’s population has peaked and all the projections have it sliding sharply in coming decades, raising questions about investment opportunities when emerging markets, in particular, offer much more obvious growth opportunities.

By 2055 government researchers expect Japan’s population to slide 30 percent to below 90 million from around 128 million with mushrooming numbers of retirees to be supported by a dwindling workforce.

Yet Japan will still be an important destination for world investors, argues Hiroyuki Arita, the Japan head of Blackrock, the world’s largest money manager.

Women, having not made such a big move into jobs as elsewhere, will cushion the decline in the Japanese workforce by taking up more jobs, he says.

Arita also sees Japan as a continuing oasis of stability in an increasingly volatile world.

Yes, there may be more growth in China and other emerging markets. But where will investors feel their money is safest if Eastern Europe, parts of Asia or other less stable areas suffer a meltdown?

The Japanese yen is already a safe haven for investors in tough times, although Japanese stocks have proven less of a refuge with a record 42 percent drop in the Nikkei share average last year.

Yet, Arita acknowledges that Japanese investors are struggling to have confidence in investing, never mind attracting others to view Japan well.

The hammering of world markets has turned Japanese people even more into a land of savers, rather than investors, Arita told the Reuters Japan Investment Summit, and that might take five years before venturing out from safety to invest again.

Japan’s people have around $15 trillion stashed away in overall savings, and asset managers have struggled to get their hands on it.

But Arita has hopes of grabbing more, once memories of the global financial crisis fades. He sees room to double or triple the current funds under management to around 200 to 350 trillion yen (around $2 billion to $3.5 billion) from just 50-90 trillion yen now.

 

 Photo credit: REUTERS/Issei Kato

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Major Japanese investors are looking for overseas investment opportunities, maybe they should consider acquiring Blackrock, the Japanese have the funds to make it happen and Blackrock would provide them with a vast and diverse investment portfolio.