Japan is an incredibly interesting country. For those that have had the opportunity to visit, the curious mix between the old and new worlds and their associated values is nothing but incredible and few countries around the world is this more acute than in Japan. Add to that some of the best snow skiing, and outstanding food, if you have yet to check the place out, now is a great time!
In terms of the economy, Japan remains lauded by some, as an economic miracle. However, less widely known, is that Japan has been in a Decades long recession. To give you an idea, the Nikkei 225 Index (one of the leading indices – and really you should use the TOPIX) was trading at a high of 38,915 on the 31st December 1989. It is currently 9371 points – less than 25% of its high! While it is a market that continues to range through large point swings – a traders paradise -the fundamentals look grim.
The slowdown in Europe has hurt Japan – given its massive exports to the embattled region. In addition, the ongoing territorial spat with China has also negatively impacted on its relationship with its other trading partner. This has the potential to seriously impact on Japan’s growth prospects, in what are already difficult conditions.
One of the interesting facts behind Japan Economic Outlook 2013 is that it has the most heavily skewed ageing population in the developed world. As a result of this, domestic consumption remains relatively weak, given an older population generally spend far less than a younger couple, say. Additionally, the impact of last year’s tsunami has now largely played out and any subsequent activity is slowing. It would almost seem there is one thing after another – oh and by the way, did I mention, the population is also declining too?
So where do we see the world’s third largest economy? Recent studies by the OECD continue to pount toward very sluggish growth. Continued calls for further intervention by the Bank of Japan in the currency markets – effectively forcing the Yen to trade at lower levels (good for exporters who now more than ever need the help) really are a feature of the economic landscape and most certainly have the potential to leave blood on the shirt of many an FX trader.
We see the equity market there, remaining within its current trading range of 8,000 to 10,000 points (Nikkei is 5 points =2500 yen) so plenty of room for the index traders to have some fun there. Equally a sub 78 yen (currently 82) would be in line with our view. The key risks here are substantial – an escalation of the Chinese territorial dispute and the ongoing intervention on the part of the Japanese authorities – either or which would kick these views into touch.
Like all forecasts or predictions given at any time, these can very quickly become out of date. This is a critical point when it comes to successful trading and investing. It is not really about successfully predicting what may happen – the real money is made by responding to what is actually happening and by taking the necessary action accordingly. For many, joining the dots between theory and practise can seem daunting and perhaps confusing so, to make that journey so much easier and one that caries confidence, why not check out one of our free online training sessions. Click here to register