17 March 2011
The Japanese market is down 15% in the last one month. The biggest drop came after Friday, the 11th’s earthquake and resulting tsunami.
Besides the foreseeable loss of lives of over 10,000 people, the greatest cause for concern is due to the damage to several nuclear reactors - and the radiation leaks that may affect vast areas of Japan and beyond over the years ahead. More than 10 million people are at risk.
Prime Minister Naoto Kan’s leadership is being tested and today even the emperor made a rare television statement urging calm, strength and solidarity among the Japanese.
Even though people are evacuating affected areas by the thousands and several cities have been leveled, the Japanese have shown remarkable (and some one say, characteristic) orderliness which has helped save many lives. One does not hear of looting, rioting, rapes and other lawlessness that could have been the case even in some other civilised parts of the world.
Japan will need to spend tens of billions of dollars in this rescue and redevelopment. But it is already one of the most indebted nations in the world, so raising the money will be an issue. Furthermore, Japan’s anaemic economy, struggling with stagflation and deflation for the last 20 years does not help.
Having said all of the above this author believes that, after being bearish on Japan for the last several years (and being proven right so far), this may be the stimulus Japan was waiting for. This author has faith in the Japanese people and their ability to rise from the ashes. Just like Germany’s and Japan’s own resurrection from the turmoil of world war 2, the next 10 years could see a new and very different Japan. Most of the infrastructure - visible and invisible - is already in place. All that is needed is a strong leader and a population that rallies behind a cause. The next 4 months will reveal whether long term value investors should buy into Japan's growth.
Watch this space for updates.
