Whenever we write about Japan (as I did here this week) at least one person (and usually a good many more) emails to tell me that Japan is about to go bust and that investing in it would therefore be utter madness.
I've looked at this before but a new note from Peter Bennett at Walker Cripps has some points to add. As far as he is concerned, the "overall financial strength of Japan is awe inspiring".
There has been endless talk over the last 20 years of Japan's lost decades. But have they really been lost? GDP figures are generally meaningless unless they are adjusted for population change. In Japan, the population has been falling at around 0.6% a year. Furthermore, Bennett reckons that Japan has been understating its deflation levels for some time "possibly by 1% or more". If so, "one could be looking at real GDP growth of nearer 3% per annum".
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
That's a number that would make some sense to people who spend a lot of time in Japan and can never quite equate the statistics with the thriving economy they see around them.
There's also the fact that the banking system is now "fully functional", something you can't say about many banking systems; the fact that the Japanese personal sector has huge net savings - household financial net worth comes to about twice the 200% GDP worth of government debt; and the reassuring fact that 93% of government debt is owned domestically (for now at least).
Since I last wrote on this, we have also seen the first steps introduced to address the deficit (and eventually the debt): consumption tax is to rise from 5% to 10% by 2015, a move which should cut the deficit by a third.
You can look at Bennett's full report here.
But if you are investing in Japan and you sometimes wish you weren't it is worth remembering that it still offers astonishing value; that value always outs in the end; and that there "should be a huge market technical improvement soon."
In 1990 (around when I first arrived in Japan) 75% of quoted equities were held in some kind of cross holding. Since then, the selling down of these positions has "provided a perpetual wet blanket on the market." But this selling is now getting near its end. Not long now and there will be no sellers left.
-
Adidas, Nike or Jordans - could collectable trainers make you rich?The right pair of trainers can fetch six figures. Here's how you can start collecting vintage Adidas, Nike or Jordans now
-
Early bird ISA investors flock to global funds, India and the USThere’s been an increase in investors maxing out their ISA at the start of the new tax year. But where are they putting their cash and why does it make sense to be an early bird investor?
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
