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The Japanese Economy: All The Reasons You Don’t Want To Invest In Japan Right Now
by Ryan Cole, Investment U Research
Friday, December 18, 2009
The Japanese economy is in trouble by all accounts.
Take its annualized growth rate last quarter. Though economists predicted a healthy 4.8%, Japan limped along at 1.3% instead.
In more worse-than-expected news, the country’s machinery orders fell 4.5% on a stronger yen and a host of other problems.
And now the central bank is injecting $81 billion in stimulus into the economy… a year later than most other central banks and at a time when it can’t afford any kind of stimulus anyway.
With debt already equal to 200% of GDP, the Japanese government has no extra money to throw around on anything. In fact, it has no real money of its own at all.
If things keep going this way, Japan won’t be experiencing a very happy New Year, especially considering that the country has a few other problems compounding its debt problem.
The Japanese Economy Is Out Of Their League
Japan has experienced a brutal deflationary cycle for much of the past two decades, leading to increasingly expensive debt and consumer reluctance: Two economic ingredients that factored into the U.S.’s Great Depression some 90 years ago.
While Japan more than likely won’t experience anything close to a depression of that magnitude, those still aren’t the marks of a healthy nation.
On top of everything else, the Japanese government is largely comprised of inexperienced, first-term politicians who don’t know the ins and outs of running a healthy government, much less a sluggish economy.
Unsurprisingly, initial reviews of government efforts describe it as largely confused… hardly a positive sign for the country or potential investors.
Live Long And Try To Prosper
As the world’s oldest country, Japan isn’t getting any younger no matter which way you look at it.
- With more than one in five people over the age of 65, Japan has an ever-increasing shortage of workers and investors.
- Worse yet, analysts conservatively project that within the next two decades, senior citizen will account for a full quarter of the population by 2030.
- And since it has the longest life expectancy in the world Japan’s elderly should be drawing down their investments for a while.
- In addition, Japan has few real advantages to combat its long list of challenges, though it faced a similar situation in the ’60s, ’70s and 80s, and still managed to pull through all the same during those decades.
Japanese innovation tends to come in static, short and jolting bursts regardless of larger economic conditions, and we could see that again at any time, so don’t count it out just yet.
But until the country experiences some sort of real upturn, don’t bet on it either.
Things might change and we’ll let you know if they do, but until then, play it safe by keeping to the sidelines.
Good investing,
Ryan Cole
- Japan’s Historic Moment Creates Historic Confusion
- Japan’s Darkest Days Lay Ahead
- Japanese Stocks: Why Small-Caps Will Lead Japan’s Economy Out of the Wilderness
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