The world’s second largest economy looks like a much better bet for investors than its first largest one. While the rest of the world enjoyed one sunny day after another, poor Japan remained in darkness. Its stocks crashed. Its property crashed. Its consumer prices crashed. This went on for, what?…14 long years? Nothing seemed to come from Japan but good cars and bad news.
But in 2005, the rising sun began to peek over the horizon. Stocks soared 40%. Consumers and businessmen seemed to recover some of their old bonsai spirit. Last year, stocks rose again…though much less than in 2005. And now the economy is expanding nicely.
But what attracts our attention today is Japan’s property market, where prices are still going down! Japan, and Japan alone, is still bucking the worldwide trend towards higher prices for immoveable objects. Its property is down 32% since 1997. Last year, the stuff fell another 2.7%. By contrast, U.S. housing rose 102% during the last 10 years. This was modest compared to Ireland, with a 253% increase…and South Africa, where prices jumped 351%.
For a contrarian, what’s not to like in Japan? The currency has been going down for years. Speculators are short the yen…hundreds of billions of dollars worth. Stocks are still less than half what they were 17 years ago. And the Japanese economy…after a long period of on-again, off-again deflation…finally seems to be growing at decent rates.
It is America, Britain, China and the other high-fliers that a contrarian should be wary of. A few years ago, we wrote a book, with Addison Wiggin, predicting that the United States would follow Japan into a long, dark slump. We were surely early…but we’re still not convinced we were wrong.
Markets and Money