Japan gets back into shape
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The good news on Japan just keeps coming: the economy has exceeded expectations by expanding at an annualised rate of 1.7% in the third quarter. And, unlike previous export-led recoveries, this one is underpinned by higher business investment and consum¬ption.
According to Keith Gyles of Capital Economics, increasing consumer confidence and the tightening of the labour market imply a strengthening consumer recovery. Corporate Japan has “finally sweated off the excesses of the previous boom”, says Chris Mayer on Dailyreckoning.co.uk.
The banking system is ready to expand again now it’s dealt with its bad loans: lending is on the rise for the first time in seven years. Newly slimmed down companies, who have managed to boost margins to post-war highs, are in for a hefty earnings boost once, as predicted, deflation ends next year.
Foreign investors have been pouring in to take advantage of the recovery, but there’s plenty of room for more overseas buyers to push stocks up. A recent Goldman Sachs poll found that just 30% of their US-based international investors are overweight in Japanese equities.
And domestic investors – famously always late to the party – should soon realise that they’re missing the beginning of a long bull run.
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