Japan Investment opportunities
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Written by tolumi
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Friday, 05 December 2008 11:12 |
Japan Investment opportunities We shouldn’t really use the image of a Japanese earthquake in a metaphorical sense, because there are plenty of people who fear, quite literally, that a real earthquake could one day rip the entire Japanese financial infrastructure apart. Too many people remember that the Kobe earthquake of 1995 caused a minor financial wipeout of its own, and many point out that Tokyo hasn’t had a quake since 1855 - meaning, statistically, that the home of Japan’s financial industry might be overdue for another one (for the chilling facts, read http://www.disasterrelief.org/Disasters/990414tokyo).The fact that Japan has reduced its bank interest rates right back to nil (honestly) in its efforts to restart its consumer economy is a sure sign that things are getting pretty desperate out there. The Tokyo government has simply been unable to get its people to buy more things from the country’s own manufacturers; instead, they save one yen in every five for a rainy day, which doesn’t help anybody. Japan Investment Opportunities & Yoshiro Mori By the time you read this we ought to know the name of the man who’ll replace the ineffectual Yoshiro Mori as Prime Minister, and what sort of smoke and mirrors he’ll produce this time for concealing Japan’s crippling government debt - which was last estimated at $30,000 for every man, woman and child in the country. In the meantime, the Nikkei has been falling back to fifteen-year lows as the markets try to figure out what happens next.
More to the point, Tokyo’s unloved bankers have been trying to figure out what the government’s latest rescue wheeze will mean for them. The authorities plan to set up a government fund which will buy some of the busted-company shares that currently weigh down the banks’ balance sheets and damage their liquidity. The banks acquired all these shares from their clients during the free-spending 1980s, when companies would post their equity as collateral against their extravagant bank borrowing; then, when the 1990 crash hit, they were left holding such vast piles of near-worthless equity in their clients that eleven years later the banks still haven’t dared to admit how much of it there is. Japan Investment Opportunities - The Threat To Europe The threat to Europe doesn’t come directly from the Tokyo stock market, but from the knock-on effects that a Tokyo plunge would have on Wall Street. European investors don’t buy very many Japanese stocks, and most have been winding back their exposure for years by selling every time the Nikkei blips upward. But US investors are much more heavily committed to the Tokyo scene and stand to lose a lot of money if the Nikkei collapses - so we’re back to square one on the cash withdrawal score. More to the point, any new slump in Tokyo will make Japanese banks pull back their investments in both US and European stocks. Not to mention China, Latin America, Korea. That’s why the third wave of a Japan/US collapse would deal such a devastating blow, first to the banking sector and then to the whole global equity scene. If bank lending collapsed, it might be years, even a decade, before equities recovered. For the moment, let’s just leave that possibility aside as a lingering nightmare scenario, because there’s no particular reason to fear it at the moment - and because there’ll be precious little we can do if it happens anyway. 
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Last Updated on Tuesday, 06 January 2009 14:02 |
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