Regular readers will know that we have been keen on the Japanese stock market for far too long. It has been one of the cheapest markets in the world for a while now (if not the cheapest), and we have been waiting for a catalyst to make it start moving.
Back at the beginning of this year it looked like we might have one. "Japan catches the Bernanke religion", said Edward Chancellor in the FT, above a piece which outlined how the Bank of Japan (BOJ) had put out a "surprise statement" clarifying its "commitment to overcome deflation" in favour of "price stability", something it then defined as inflation at 1% a year. It then stepped up its version ofquantitative easingby 10trn.
Finally, it looked like Japan had decided to stop being the victim of everyone else's currency degradation (a strong yen is always bad for Japan's market) and to join in the currency wars instead. The yen tanked (down 7% against the dollar in the first quarter of this year), foreign investors piled in and stocks rose by a good 20%. We were happy. But as is always the case with Japan, we weren't happy for long.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
At the end of March, the eurozone crisis returned with a vengeance. The yen - thanks to its safe haven status (relative to everyone else at least) - soared. It was, as James Mackintosh points out in today's FT, the only one of 16 major currencies to fall against the dollar in the first quarter; it became the only one to rise since (up 4%).
And the market? It has proved to us all yet again that the only thing it cares about is the yen. Yesterday the Topix hit levels "seen on only 11 days in the past four years and before that not since December 1983". Worse, "even taking into account dividends and inflation, 1,000 invested in 1985 has made exactly nothing". It isn't quite as bad as it sounds, in that UK investors will have made a turn on the currency, but it isn't that great either. So what next?
Japan's fundamentals are good the balance sheet recession there at least is over. It is still the cheapest market out there. It is also worth noting that the BOJ is still targeting 1% inflation, and it is under a good amount of political pressure to make sure it hits its target. It has to keep going with its asset purchase programme.
So while some of you will mock, I know, we will keep waiting. After all, we aren't fund managers and neither are you we don't have to report quarterly gains, we just have to make real returns over the long term. That's something we still think we will do in Japan.
For more on this, see our latest cover story on the matter here: Why Japanese stocks are set to soar,and a more recent piece from our markets pages here: This takeover boom will light a fire under Japanese stocks.
-
8 of the best houses for sale with annexesThe best houses with annexes – from a period property in the Lake District to a 13th-century house with a two-bedroom annexe in Saltwood, Kent
-
Zelenskyy moves to appease Donald Trump – what happens now?Ukraine’s president Volodymyr Zelenskyy is conceding ground to secure the least-worst deal possible, says Emily Hohler
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
-
This isn’t the stagflationary 1970s – but neither is it the low-rate world of the 2010sOpinion With soaring energy prices and high inflation, it might seem like we’re on a fast track back to the 1970s. We’re not, says Merryn Somerset Webb. But we’re not going back to the 2010s either.
