Japan: investors ignore good news

The good news just keeps coming in Japan. Employees’ earnings grew by 0.9% year-on-year in August, slightly down from 1.6% in July. The fact growth has decreased “is not a disaster”, says Freya Beamish of Pantheon Macroeconomics. “It’s already quite something that Japanese wage growth was ever high enough to fall to 0.9%.” And besides, the details of the data imply that the labour market is getting even tighter.

Under prime minister Shinzo Abe employment growth “has exceeded any reasonable expectations”, notes Jonathan Allum on The Blah. The number of Japanese people of working age has declined by 4.5 million over the past five years, but there are 2.5 million more in employment, partly because more women have entered the workforce. This is “remarkable”.

At the same time, “Japan’s labour constraints have forced it to accelerate its adoption of automation”, says Lex in the Financial Times. Companies such as Fanuc and Sony are market leaders in robotics. The government also keeps promoting better corporate governance. “Companies are under pressure to unwind irrational holding structures and put the cash trapped in them to better uses.” But while Japan’s prospects keep improving and the market remains attractively priced, foreign investors have sold nearly all the stocks they acquired since the advent of Abenomics in 2012, say CLSA analysts. Time to buy.