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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