More mammoth stimulus in Japan

Japan has declared a state of emergency and announced a $990bn stimulus package in order to deal with the effects of Covid-19. While the number of cases in the world’s third-largest economy remains relatively low for now, a sharp increase in major urban areas in recent days has rattled the authorities. Prime Minister Shinzo Abe has also unveiled a mammoth stimulus plan worth 20% of GDP.

Japan is likely to attract increasing attention from income-seekers jaded by sweeping dividend cuts in other developed markets, Jim McCafferty of Nomura tells Reuters. About 50% of Japanese firms have net cash on their balance sheets, leaving them well placed to honour dividend commitments. By contrast, the same is true for just 18% of the 100 biggest US non-financial firms and just 21% in the UK. The Japanese market currently yields 2.8%.

Part of the bull case for Japan has long rested on the idea that cautious, cash-hoarding Japanese corporations were becoming more like their activist, buyback-happy Western counterparts, writes Jonathan Allum in The Blah newsletter. With Western governments now clamping down on dividends and buybacks, it would be a “supreme irony” if the Covid-19 crisis ends up seeing the rest of the world adopting some of the traditional features of Japanese capitalism, rather than the other way around.

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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.