Tuesday, 9 December 2014

Is Japan Doomed To Recession?

Today, I woke up and saw that Saizen REIT, one of my most substantial holding has fallen by quite a bit since I last checked. This was in part due to the recessionary reports about Japan. Abe-san has also called a snap election just two years into his term to garner new support for his economic policies. I am now wondering if the economy is ever going to get its act together. However, Abe-san is really someone to be admired. Decisive and strong, he looks like someone who can really change decades of deflationary pressure in the economy against the pessimism of the Japanese people.

Well, for now, I am still cautiously optimistic about Japan as there is just so much productive capacity in the economy that is not maximized to its fullest potential. However, the Japanese looks to be extremely complacent and they really need to get their act together before they are overtaken by other emerging economies. They are like an economy that is so risk adverse in guarding their wealth that they do not know that wealth is lost every day through a lack of vitality in the economy. Even a greying labour force can spur the economy. Just look at Singapore and the number of elderly who are still working past their retirement age.

For what its worth, it is time for the Japanese to start learning from other economies. If there is a lack of consumption, build the habits of consumption into the Japanese people. How do you do that when interest rates are 0 and people are still not consuming? Well, import labour, make expats consume, do whatever it takes to stimulate the economy. Without a strong economy supporting the country, public dissent will be much worse relative to the initial backlash from immigration friendly policies anyway.

In terms of business culture, break down the traditions. Decades of slowing growth has proven that the old Japanese way of working is not feasible. The world is in a stage of hyper growth and efficiency now due to technological advances, and working more is actually working less in certain situations. Give your employees more freedom and autonomy and rebuild the business culture. Learn from the Americans, and build more billion dollar companies.

In terms of QE by the Bank of Japan, simply increasing the money supply has proven to be ineffective in generating inflation. There has to be a corresponding policy to complement monetary easing and drive demand. The structure of the economy needs modification. Encourage spending through partnerships with businesses.

What about tourism? What happened to the Japanese pop culture? It used to be much stronger than the Koreans. What is the entertainment industry doing? If the Koreans work twice as hard, you work thrice as hard. That is what Japan did during the post war periods, and propelled itself from a manufacturing economy into a service and technological economy in just decades. Wake up, learn from the past, and do what you did. There used to be much more dreams in the nation.

At the end of the day, this is just some ranting by me after looking at how the NAV of Saizen fell from S$1.24 to S$1.14. I do know that everything that I just out-laid needs time to execute, especially in a hyper democratic and bureaucratic government like Japan. However, I feel that traditions are like chains sometimes, and disruption has to occur in order to bring a new age of hyper growth in an economy.

The question is: can the government and the people work together and push past recession into growth?

Work hard Japan, I am rooting for you. Please don't disappoint me, I am learning Japanese for the future, don't make my learning obsolete and redundant. Lol.


  1. interesting comments or panic reaction from a 10cent drop in your counter, haha.
    No pun intended.

    Well, from a qualitative perspective, i think positively of Japan performance. Why?
    Simply it has lie dormant for 2 decades and while Abenomics is showing initial results, it has yet to reach his target.

    6 months ago, there were enterprising companies launching properties in Tokyo to sell here. I went out of curiosity - 1 bedroom costs about 300-380k sgd........and the translator could not answer many of our questions.

    The price i believe has appreciated since then and there are now increasing agents getting locals to invest there.

    So, i believe the forthcoming election will give another good boost to the stock market !

    All the best !

    1. Hi Mr Chua,

      Thank you for your insights. Well, I just don't understand why there is so much fear in the market right now. The constant "Japan is Doomed", "Japan has officially fallen into Recession" and more of the nonsense media reports are just fear-mongering.

      The aim of this post is to tell people, hey, ignore the rubbish from the media. They are in the business of dramatising affairs to make money from their content.

      With regards to the stock market, I am really worried. New highs are not substantiated by actual growth so there could be asset bubbles. The risk inherent in the economy is high, even though the potential of the economy is high as well. Well, thats Japan, ever different.