Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22
AI Tech Stocks Current State, Is AMAZON a Dying Tech Giant? - 20th June 22
Gold/Gold miners fundamental checkup - 20th June 22
Personal Finance Tips: How To Get Out Of A Tough Financial Situation - 20th June 22
UK House Prices Relative to GDP Growth - 19th June 22
Will Global Markets Be Pushed Deeper Into Crisis Event By The US Fed? - 19th June 22
Useful Things You Need To Know About Tweezer Top Candlestick Pattern - 19th June 22
UK House Prices Real Terms Sustainable Trend - 17th June 22
Why I’m buying the “new” value stocks… - 17th June 22
Optimize Benefits from R&D in Software Product Development with an R&D Tax Credit Software - 17th June 22
Want To Save On Your Business Energy? Here Are Some Helpful Tips - 17th June 22
State of the Stocks Bear Market - 15th June 22
The Gold Market Is Getting Ready for Another Interest Rate Hike - 15th June 22
The Dow Industrials’ Big 8-Wave Cycle is Incomplete - 15th June 22
7 Things You Need to Know About Finances - 15th June 22
Dow Stocks Bear Market Forecast Trend Trajectory - 13th June 22
Why Putin has KILLED Russia - 12th June 22
Trading the Calm Before the Stock Market Storm – Consider Putting On A Long Strangle - 12th June 22
Shrinkflation! - 12th June 22
6 Useful Tips To Help You Create A Good Marketing Strategy - 12th June 22
Big Inflation Will Spur Gold Price - 11th June 22
Economic "Hurricane": Here's a Take on a Bank CEO's Warning - 11th June 22
Axie Infinity (AXS)Mmade a lot of People Rich… Temporarily, What We Learned - 11th June 22
The CRACK UP BOOM! Implications for Stocks, Housing. and Commodities, Silver Potential - 10th June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Japan’s Big Money Printing Gamble

Stock-Markets / Japanese Stock Market May 29, 2013 - 01:50 PM GMT

By: Investment_U

Stock-Markets

Carl Delfeld writes: Before this year’s sharp upturn, Japan’s economy and stock market had been going nowhere fast for a long, long time.

Let’s put things in perspective.

In 1990, when I was head of Japan equity sales for Robert Baird & Co., the market value of Japan’s stock market was at its peak – roughly 50% the value of all world markets combined.


But by last November, its stock market was down 75% from its peak – representing just 8% of world stock markets.

I went to Japan as an exchange student to learn more about the “Japanese miracle.” But since 1990, the size of the Japanese economy has not increased at all. And during this time, there have been 17 prime ministers and nine stimulus plans.

Not a pretty picture.

You can imagine the pent-up frustration and skepticism when elections were called for once again last December.

But there was something new up the campaign sleeve of the leader of the Liberal Democratic Party (LDP), Mr. Shinzo Abe.

First, he committed to cajoling the Bank of Japan to pump liquidity into its economy to try to get some fiscal mojo and inflation going. Second, he pushed the value of the Japanese yen down to help boost exports profits, which would light a fire under the dirt-cheap, export-oriented stock market.

Japan’s Nikkei 225 started to climb about a month before Abe led the LDP to a landslide victory on Dec. 16. Following his command, the Bank of Japan soon went to work unleashing a torrent of liquidity – three times the pace of our Federal Reserve printing presses.

The results have been just short of spectacular. The Nikkei is up 70% since November.

But as last week’s action proved, Japan is still home to immense volatility. That means savvy investors are smart to ride the booming Japanese bull market, but they must have a trailing stop-loss in place.

The Downside Is Growing
Thinking more deeply and independently, though, let me offer you a contrarian skeptical view on Japan’s weak yen strategy.

First, a weaker yen translates into a cut in the real spending power of Japanese consumers. In effect, it’s a reduction in real income.

How will sharply higher prices for imported food and fuel sit with Japan’s aging citizens? Not well.

Second, a weaker dollar weakens the role of the Japanese yen as one of the world’s reserve currencies. How can the Bank of Japan make sure that a weakening yen doesn’t turn into a full-on rout?

Third, let’s not forget, with virtually no natural resources of its own, Japan is still an import-dependent economy. That means not all Japanese multinationals will have soaring profits since the weaker yen means higher imported raw material prices.

And finally, remember that a weaker yen cuts into returns of foreign investors in Japanese stocks. It hasn’t discouraged investors so far only because Japan’s stock market has risen so rapidly. But eventually, the run will slow and investors will get skittish. We may have already seen the first sign of this trend last week when Japan’s markets made a one-day nosedive.

In short, a policy of weakening your currency is like a drug – you always want more but it never solves the root problem.

Good investing,

Carl

Source: http://www.investmentu.com/2013/May/japans-big-gamble.html

http://www.investmentu.com

Copyright © 1999 - 2011 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in