Investing in Japan: Riding the Next Bull

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The world’s second largest economy looks like a much better bet for investors than its first largest one. While the rest of the world enjoyed one sunny day after another, poor Japan remained in darkness. Its stocks crashed. Its property crashed. Its consumer prices crashed. This went on for, what?…14 long years? Nothing seemed to come from Japan but good cars and bad news.

But in 2005, the rising sun began to peek over the horizon. Stocks soared 40%. Consumers and businessmen seemed to recover some of their old bonsai spirit. Last year, stocks rose again…though much less than in 2005. And now the economy is expanding nicely.

But what attracts our attention today is Japan’s property market, where prices are still going down! Japan, and Japan alone, is still bucking the worldwide trend towards higher prices for immoveable objects. Its property is down 32% since 1997. Last year, the stuff fell another 2.7%. By contrast, U.S. housing rose 102% during the last 10 years. This was modest compared to Ireland, with a 253% increase…and South Africa, where prices jumped 351%.

For a contrarian, what’s not to like in Japan? The currency has been going down for years. Speculators are short the yen…hundreds of billions of dollars worth. Stocks are still less than half what they were 17 years ago. And the Japanese economy…after a long period of on-again, off-again deflation…finally seems to be growing at decent rates.

It is America, Britain, China and the other high-fliers that a contrarian should be wary of. A few years ago, we wrote a book, with Addison Wiggin, predicting that the United States would follow Japan into a long, dark slump. We were surely early…but we’re still not convinced we were wrong.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Comments

  1. What is not to like about Japan?

    For one thing their reliance on imported energy and for a second their physical location on the planet is not what you would call geopolitically ideal. Probably some other very good things as well.

    Agreed on the nice nature of the contrarian call though, there is a LOT to like about Japan and all those potentially repatriating yen shortly. I have to return for a longer visit there one day. Fascinating place.

    Reply
  2. I’m a real estate agent of some 25 yrs in the eastern suburbs of Sydney
    The market in this town is for simplicity sake divided into 3

    1. top end ie above 4 Mil -the buyers often pay CASH and have wide discretionary spending power
    2. mr & mrs climber who often borrow 1 MIL plus on twin high incomes -50-100K will kill the deal stone dead!
    3. the lower middle income families who lack the better asset base ie West and South West are geared. (10-20k will do same)are seeing record mortgagee auctions
    I have been reliably informed fully 80% of all auctions in this market are now mortgagee
    Being in mind there are 300% more auctions in that area now
    Drops of 30-40% in some cases from boom prices are being accepted to obtain a firm sale

    Conclusion:
    When the US probs really hit hard here and import inflation begins to bite ,higher rates ( say another 2 x 0.25% rises would do the trick) the market overall will fall heavily

    NOTE: last boom in 80’s rates on Var were around 14% and went to 17.50%-approx 18% rise in monthly service costs

    This boom- Var rates 02-03 were around 6.0% (without the free sausages)
    Soon Var rates of 8.0% will be common, a change of 42%!
    PS -don’t listen to the nonsense of ABS or RBA stats (ie meaningless averages)or even financial reporters (most were tenants then and some still are)
    The above were and are facts for the average homebuyer/investor

    When the employees in the finance and legal markets finally get their pink slips due to the mighty USA recession the ability to service these 1 MIL plus loans will end and the overall market will collapse
    “Good night Irene”

    Grim thoughts but a wonderful opportunity to make serious money-

    Have a nice day

    Reply

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