Better than expected, but not much hope
Am in no way an expert on the Japanese economy, but one of my friends was stupid enough to ask my opinion and anyway economists are often as wrong with predictions as amateurs, so here goes with what I have got out of my readings of the FT and the Economist:
Strangely, the fact that the Japanese economy is recovering gives me less rather than more hope for the future. It was only desperation at the length of the recession and the (occasional) vision of the last prime minister that was forcing some kind of change, as public opinion, especially when crying out for changes that hit the pocket and power of the ruling classes, is usually ignored in Japan. See, for example this and this story about the leaders of sumo putting their champion under house arrest (!) for evidence of the likely lack of change. If the ruling classes of Zimbabwe are hanging on, I don’t see why the Japanese revolution won’t need to take at least another 50 years.
It is true that Japan, as some are pointing out, does not have the immediate causes for concern of the UK, US, Australia- not such serious personal debt problems (although more than outsiders might think with the Japanese reputation for saving), no housing bubble, banks that have more or less sorted themselves out, no trade deficit. And the inevitable short term rises in interest rates and the rate of the yen can only be good. The pessimism (apart from being part of my personality!) comes from three things:
- Because virtually all the Japanese growth is export lead, the Japanese cannot survive a crash in any of those other markets unscathed
- All the things that could help consumer spending in Japan (rises in interest rates, level of the yen, wages) will hit the export lead companies and leave the economy off evens at best
- All the longer term trends (aging population, lack of creativity in the workforce, Chinese and Korean competition) are negative
So, Aunty Alex says hang onto your investments in yen in the short term (they can’t get any lower, surely!), and stick some in Bangladesh for your (slightly risky) pension fund