More mammoth stimulus in Japan

Japan's prime minister, Shinzo Abe, has unveiled a mammoth stimulus plan worth 20% of GDP. 

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.

Recommended

Which companies will lose the most from the energy windfall tax?
Energy stocks

Which companies will lose the most from the energy windfall tax?

The government’s new energy windfall tax has muddied the waters for investors and companies alike. Rupert Hargreaves explains how it might affect some…
27 May 2022
The MoneyWeek Podcast with Russell Napier at the Library of Mistakes
Investment strategy

The MoneyWeek Podcast with Russell Napier at the Library of Mistakes

Merryn talks to Russell Napier about Edinburgh’s Library of Mistakes, the age of debt and financial repression, plus why he has never invested in Chin…
27 May 2022
Cryptocurrency roundup: another torrid week for crypto
Bitcoin & crypto

Cryptocurrency roundup: another torrid week for crypto

Cryptocurrencies suffered yet another intense week. Saloni Sardana rounds up the week's crypto news.
27 May 2022
Ocado faces a “crunch” year – should you buy or avoid?
Share tips

Ocado faces a “crunch” year – should you buy or avoid?

Ocado was one of the big winners from the pandemic as customers moved online. But now it’s struggling, and losses are growing. So, asks Rupert Hargrea…
27 May 2022

Most Popular

The world’s hottest housing markets are faltering – is the UK next?
House prices

The world’s hottest housing markets are faltering – is the UK next?

As interest rates rise, house prices in the world’s most overpriced markets are starting to fall. The UK’s turn will come, says John Stepek. But will …
23 May 2022
The Federal Reserve wants markets to fall – here’s what that means for investors
Stockmarkets

The Federal Reserve wants markets to fall – here’s what that means for investors

The Federal Reserve’s primary mandate is to keep inflation down, and lower asset prices help with that. So, asks Dominic Frisby – just how low will st…
25 May 2022
Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?
Investment trusts

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust has fallen by almost 45% so far this year. Rupert Hargreaves asks if no…
26 May 2022