Global growth lifts all tides
Nevertheless, Seager-Scott is reluctantly neutral on Japan, in light of the improving global trade picture, “even if the domestic situation is uninspiring.”
Rathbones’ David Coombs is also positive on Japan, but not because he thinks there will be a pick-up in the economy due to prime minister Abe’s stimulus measures.
“I’ve seen too many false dawns that I don’t have much faith,” he admitted.
“Having said that, there are interesting companies in Japan in tech and healthcare, and they have exposure to a huge consumer market in China right at its back door.”
So, investors’ stance toward the region seems to be based on opportunities that have opened up as a result of a rosier global picture, a strong dollar making the yen more competitive, rather than improving fundamentals or faith in Abe’s “three arrows” policy.
According to global market strategist at JP Morgan Asset Management, Michael Bell, “Japan has largely put its “deflation risks behind it.”
“The key cause, in my view, for the deflationary malaise was not predominantly demographic but was caused by the collapse in credit growth in the 90s,” said Bell.
“Right now, we are seeing a very tight labour market in the country. The job to applicant ratio is the highest it has been since 1974.
“And bank credit creation is actually growing. Those two things were not in place during the deflationary period decades ago.”
Contrary to opinions around in the market, Bell contends that the economy is stuck in a “lowflation” kind of limbo environment, its next challenge being to migrate to inflation levels hit by other developed markets.
