How can Nikkei 225 not recover after so many years?

@ tyrant

* You are right, if you look at land prices for the entire country and look at annualized price appreciation it didn't look like an outright bubble. However, prices still went up in a straight line all the way up to 90s. "Low volatility" invites leveraged speculation, because it looks like risk free money.
* There were much more intense bubbles around the big cities that invited the most feverish speculation. Look at the disparity in large urban city land prices vs. total land prices in the mid to late 80s:

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* Regarding the profitability of the non-financial industries in Japan. I could imagine - and this is just a guess - the Japanese industrial and electronic companies were and are still suffering from competition from Asian Tiger countries and now China.

* Regarding historic PE ratios. I have searched for a long term Topix or Nikkei PE chart of Japan (1970 - today) a while ago and couldn't find any. Anybody with access to a Bloomberg could please post one? Or maybe somebody with any other source. Thanks.
 
Quote from Topsurfi:

the problem in US is not only gouvernment debt but private dept situation now. Japanese people went into the crisis with lots of savings but USA people today have negative savings since years, not good.
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Posted here before but I have read the Japanese had a savingsrate of +14% when the downturn started and it bottomed out at something in the area of 2%.

In the US, where the savingsrate is 2%(?) a 1% increase in savings would mean a 1% shrink in GDP so that puts the US pretty much between a rock and a hard place doesnt it?
 
Don't forget US has its military to keep its vacuum works as hard as possible to suck liquidity around world. Japan couldn't do it. Therefore, yen is pretty much very submissive to USD.

By the way, India is not growing as fast as China, at same time, it isn't that safe too. It would be very "unfortunate" there is some kind regional conflict in India. :D
 
Deflation.

The Japanese have done everything within their power over the last few years to mask the growth and inflation they were actually experiencing in order to lower the value of the yen in hopes of exporting their way to stable growth. While the rest of the world's CPI and PPI's were elevated, Japan's wasn't.

It was working for a bit too, the Nikkei outperformed the S&P 500 from Oct 2004 through Oct 2008. The party's over. Even with the printing presses running for the better part of a decade, the yen is appreciating. The BOJ would love to have $/yen north of 150, but the world is catching on to the deflationary spiral that has gripped them, masked only temporarily by the insane commodity inflation.

Best part is, it's coming here now. You can thank globalization and free trade pacts. Watch where the $ goes. If you think the recent rally is just "risk aversion" and hedge fund carry trade unwind you're mistaken. Central banks see the writing on the wall and are undoubtedly behind the $ rally of late
 
Quote from achilles28:
Good question!
The answer comes down to nominal value.
The Japanese flooded their Market with ridiculous levels of Yen, back in the 80's.
Think Zimbabwea-style inflation.
Real Estate prices appreciated 10 to 100 TIMES their original pre-bubble Value.
That money bubble inflated the Nikkei some 300% to 40K.
That 40K reflected their depreciated YEN, in 1990 terms. Thats it.
In no way was it an accurate reflection of their inflation-adjusted growth!!
It was just money printing run amok, expressed through Stock Value.
So when the Bubble Collapsed, and all that money dried up, and the Nikkei returned to fair value relative to their hugely deflated currency - around 8K.
It could happen here.
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Back to the Future ... of U.S.A.
 
FWIW one big factor that contributed to the Nikkei reaching 39000 was the strength of the big 4 brokers, Nomura, Daiwa, Yamaichi, and Nikko, and their ability to keep the market going. They had it down to a science. That factor no longer exists.
Futures were introduced at around 30000 yen, as I remember. At that time. along with bubble factors, GS and the other foreign brokers took over control using their advanced knowledge of futures.
 
Good discussion! So, the US may still have hope if the dollar appreciates over the other currencies (which I think it will, except for JPN). This would help with the debt.

Also, it sounds as though debt conpared to GDP is not that bad in US.

Somehow, I have not given up on the US...like Jim Rogers!
 
Thanks for all replies.

The purpose of this thread is actually to question whether it is viable to start looking at investing in US. There are bargains everywhere. But when I look at the N225, I always hesitate to buy even at current prices because I cannot understand why N225 cannot recover after 20 years. There are some valid points mentioned regarding why it did what it did. However, I have to ask the more pertinent question now, which is, do you think SP500 will surpass the old high in 5 years or 10 years time? Given all the inflationary as well as deflationary arguments, it is all too confusing. Please let me know what you think. Given your knowledge of what a bubble is like, given the deflationary factor of commodities, given the low interest rate environment, given that real estate have corrected from a bubble?(was that a bubble?), given the confusing views of whether the USD will depreciate(because of printing) or possibly appreciate for some odd reasons, what is your judgment???:confused:
 
Move up the capital structure. Forget equities and buy corporate debt. If not qualified, invest in a mutual fund that accomplishes this.
 
How can Nikkei 225 not recover after so many years?


it's called, running in place, that's what they have done for a long time, they have worked hard, and ingenuisly and industriously, only to 'stand in place'.

During that same time period, the Koreans and Chinese have picked up the slack, and become competent competitors to the Japanese, for all manner of products, from five and dime, to commercial industrial equipment.

Meanwhile, tha Japanese have shouldered the burden of flooding the world with cheap financing, primarily to keep the world buying their exported products, upon which their economy relies heavily.

Also, they have no natural sources of fossil fuels, and are dependant upon imports to fuel their country. To their credit, they have done great things, and are efficient and capable, and have developed alternative sources of energy so they are not as dependant as they otherwise might be.

Unfortunately, they are also a direct and indirect victim of the global squeeze due to the soaring prices of energy...what I refer to as 'the straw that broke the camels back'.

Kind of a perfect storm of variables that has had them effectively, running in place.

No doubt they also have some exposure to bad paper related to the US mortgage market, which may strain their banking system...but, as they are wont to do, will 'air their dirty laundry' in this regard at a slow and measured pace, that may not truly reflect their immediate losses.

On a side note, I am the beneficiary of what I assume was a bad year for the Japanese fish markets, as for the first time in many years, the price and availability of fresh salmon here was the lowest / highest in many years. I attribute it to the compromised position of the Japanese consumer, and the fish, instead of being bought by the Japanese, at historically high prices, had to be channeled out to US retailers, at prices low enuf to find buyers.

I must be part grizzly.

Interesting that a principal tenet to their own asset bubble was the inflated values of their realty, there will be parallels with US markets. Also, they, like the US, have an aging population, and may be in the inexorable process of 'drawing down their savings', unfortuantely, at the same time as those savings are losing value, another perfect storm, and another parallel.
 
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