Och Aye Jimmy - Revisiting Japan
Dear Reader,
I am like to think of myself as a fair guy. I like to give everyone the opportunity to prove me wrong. It is the same with funds and markets (although lets be honest Natural Gas has proved itself to be an untameable beast this year).
I have given Japan a rough time over the last year. I fell into a trap of thinking the P/E ratio of the indexes looked decent value and that there was good upside potential. When the September 2018 market sell off came and went Japanese funds did not recover like their global counterparts. I have a saying you only learn in the markets by losing money. I learnt.
I thought I should give them another chance by having another look at some of the fundamentals and hopefully educate myself a little in the process.
Japan is the world's 3rd largest in terms of nominal GDP at 5.4 trillion USD and the second largest developed country in the G7. Its GDP per capita 48,919.60 USD dwarfs its neighbours (apart from Singapore and Macau) coming in at number 7 in the G20 and 16th in the world. As a weird aside Luxembourg has the highest at 107,243.20 - I used to visit IMI lux in the old days; terrible place to go out and eat. Burundi has the lowest at 210.80... Probably a cheap night out there then.
10% of the global fortune 500 companies are Japanese. It has the highest debt to GDP of any developed country at 236% smashing the granny out of number 2 placed Greece. Japan is categorised as an Island nation comprising of 6,852 islands (I never knew that) of which only 430 are inhabited.
Japan's population of 126,817,712 (united nations guesstimate) accounts for 1.64% of the world's population and the average age is 46.7 years old. The population is aging and declining
2015 -0.09%
2016 -0.18%
2017 -0.21%
2018 -0.23%
2019 -0.26%
That said they are starting to have more children with a fertility rate of 1.42 in recent years up from 1.3 back in 2005. To put the average age number in perspective
China 37.3 years
South Korea 41.3 years
UK 40.3 years
Italy 46.3 years
USA 37.8 years
Its stock markets are having a complete shocker relative to its peers. This is even worse than it looks when you consider that the Bank of Japan is one of the top ten shareholders for 49.7% of all Tokyo listed companies. Even having that as a backstop isnt driving the markets up and the average yield is around 1.68%. The 10 year govvy is yielding -0.23%.
I think I have answered my own doubts. For now I think there are better opportunities in other geographical locations but will keep an eye out for individually well performing funds.
One thing that has struck me as I delved into it was that to my jaundiced eye the Japanese culture is heavily Scottish. They love whisky.. so much so a 50-year-old Yamazaki first edition went for record $343,000 at an auction in Hong Kong. They love deep fried food.
Some of their words were clearly invented by a drunk Glaswegian.
Fuubutsushi sounds like someone not particularly hungry but might eat some seafood if its on offer. Actually means in Japanese “The things – feelings, scents, images – that evoke memories or anticipation for a particular season.”
Boketto sounds a bit like someone being slightly sick on Sauchiehall street. Actually means “The act of gazing vacantly into the distance.”
Mono no Aware sounds like a drunk man reply to a ticket inspector being asked why he hasn't got a ticket for the train. Actually means “The bittersweetness of a brief and grading moment of transcendent beauty.”
With that I wish you all a very pleasant week ahead
Don 'Toronaga sama' King
