Japan: Is the sun beginning to rise?

Readers should know by now that I’m a contrarian. The worse things seem to get, the more interested I become. Take Japan for example.This island nation has suffered one economic bad spell after another for more than 20 years. Japan is a depressing tale of economic and political mismanagement that has resulted in years of negative interest rates, a huge budget deficit, a stagnant economy, moribund stock market and a disillusioned and aging population. The massive earthquake and tsunami that triggered a nuclear disaster at a nuclear power plant in the eastern part of the country was seemingly the last straw that broke this country’s back.Japan is now officially in recession, which started in the last quarter of 2010, and has both widened and deepened thanks to these calamities of nature. Faced with enormous rebuilding costs, any effort to rein in the government’s huge deficit looks hopeless. As a result, last week Moody’s Investors Services placed Japan’s government debt on review for a possible downgrade after changing its view in February from “stable” to “negative.”So why am I interested in investing in a country faced with this unending list of woes?After two decades of lackluster efforts to revive the domestic economy, a new approach has been forced on the nation’s leaders, thanks to the earthquake and tsunami. An enormous rebuilding of parts of the economy has to be undertaken, similar to the kind of reconstruction Japan undertook after World War II. Experts estimate it will cost $200 to $300 billion.Japanese corporations need to increase their capital expenditures in order to regain lost capacity as well as to invest in improving their supply chain operations against a repeat of this kind of disaster. In addition, they will spend more money on earthquake-proofing existing factories and office buildings and acquiring alternate power sources. This could add another $150 to $200 billion to national spending.Aside from all the spending that is beginning in the near future, the government will maintain its extremely loose monetary policy. Interest rates will remain at zero percent for the foreseeable future. At the same time, the yen is expected to decline as investors shy away from bonds that are rated “ negative” by Moody’s and an economy that is in recession.To my way of thinking, here is an economy that is on the eve of a massive stimulus program, a declining currency (good for increasing exports), a corporate sector hell bent on increasing capacity and regaining global market share (think autos) and a population that is willing to finance the effort regardless of Moody’s outlook on their bonds. In the eastern region (unlike the United States), new housing is in great demand. And unlike our own financial institutions that refuse to lend despite low interest rates, Japan’s banks will lend and lend to corporations and individuals in order to help the recovery effort.What this indicates to me is that a V-shaped economic recovery in Japan is a strong possibility. If I’m right, the stock market is a screaming buy.Over the longer term this particular set of economic variables may actually pull the country out of its decades-long deflationary quagmire. Japan as a nation needs to spend again, build again and buy again. Up until now, there hasn’t been the will or a really compelling reason to do so. Now, whether you call it divine intervention or simply the flip side of a bad set of circumstances, Japan has its mojo back. It may take a few years before all of the above unfolds, but I think we are on the cusp of dramatic change within this country. Remember, you heard it here first, folks. Bill Schmick lives in Hillsdale, N.Y., with his wife, Barbara, and their Labrador retriever, Titus. He is registered as an investment advisor representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 888-232-6072 or email him at Bill@afewdollarsmore.com.

Latest News

Robert J. Pallone

NORFOLK — Robert J. Pallone, 69, of Perkins St. passed away April 12, 2024, at St. Vincent Medical Center. He was a loving, eccentric CPA. He was kind and compassionate. If you ever needed anything, Bob would be right there. He touched many lives and even saved one.

Bob was born Feb. 5, 1955 in Torrington, the son of the late Joesph and Elizabeth Pallone.

Keep ReadingShow less
The artistic life of Joelle Sander

"Flowers" by the late artist and writer Joelle Sander.

Cornwall Library

The Cornwall Library unveiled its latest art exhibition, “Live It Up!,” showcasing the work of the late West Cornwall resident Joelle Sander on Saturday, April 13. The twenty works on canvas on display were curated in partnership with the library with the help of her son, Jason Sander, from the collection of paintings she left behind to him. Clearly enamored with nature in all its seasons, Sander, who split time between her home in New York City and her country house in Litchfield County, took inspiration from the distinctive white bark trunks of the area’s many birch trees, the swirling snow of Connecticut’s wintery woods, and even the scenic view of the Audubon in Sharon. The sole painting to depict fauna is a melancholy near-abstract outline of a cow, rootless in a miasma haze of plum and Persian blue paint. Her most prominently displayed painting, “Flowers,” effectively builds up layers of paint so that her flurry of petals takes on a three-dimensional texture in their rough application, reminiscent of another Cornwall artist, Don Bracken.

Keep ReadingShow less
A Seder to savor in Sheffield

Rabbi Zach Fredman

Zivar Amrami

On April 23, Race Brook Lodge in Sheffield will host “Feast of Mystics,” a Passover Seder that promises to provide ecstasy for the senses.

“’The Feast of Mystics’ was a title we used for events back when I was running The New Shul,” said Rabbi Zach Fredman of his time at the independent creative community in the West Village in New York City.

Keep ReadingShow less