Japan: why are you wasting your time and money?
|Sep 11, 2007|
Subscribers have saved plenty of money by avoiding Japan, on which we have had a Sell for a long time. That has been validated by news Monday that Japan’s economy contracted in the second quarter of 2007 despite the fact that the Bank of Japan has kept its interest rates amongst the lowest on the planet.
Japan's sluggishness is worsening, what with political developments leading the country nowhere. That lack of direction must keep taking its toll on growth. Below we discuss more recent political developments that are harmful.
Why not review our fresh update of The Economic Clock for Japan? That way you can get a concise analysis of why we remain so leery of economic developments, too.
Thoughts: The Economist this week ran a scary article on Japan, "Cabinet Shuffle in Japan: Buying Time".
Here are key thoughts for investors:
Prime Minister Shinzo Abe's Liberal Democratic Party (LDP) lost July's Upper House elections. Having thus lost control over the Upper House, PM Abe tried to boost his popularity by revamping his cabinet. While the experience of the new cabinet is rich and deep, the author asserts that the revamp smells too much of "jobs for the boys": Abe has put too many "old boys" in to his cabinet.
Next to that taint, the worse thing from an investor's perspective has to be that the new cabinet and Abe himself appear to have a hazy, if any vision of where they want the country to go. He appears to have given up on his reform program, shelved plans to have cut public spending, and backtracked on moves to decentralize the government.
Meanwhile, now that the opposition Democratic Party of Japan has a majority in the Upper House, it wants to topple Abe this month when the Diet convenes for a special session.
The reason for this special session is to see whether Japan's "anti terror" measures should be extended beyond their November expiration date. They allow Japan to keep on refueling in the Indian Ocean in order to help US troops in Afghanistan. The opposition will block this measure in the Upper House.
The central issue is that if Japan pulls out of this deal with America, her international reputation would suffer. So while the Opposition wants this, Abe's LDP party does not.
And whether Japan pulls out of the deal depends on Abe himself. He might decide to appease the DJP by giving in. Or, he might not get the required two-thirds majority in the Lower House when it later votes on whether to extend or cancel the "anti-terrorism" measures.
So we don't like the place. We just now have updated The Economic Clock™ for Japan. Why not read our thoughts and divine which sectors to avoid in particular - and, if you must be in Japan, which ones look promising?