The Bank of Japan has pumped yet more money into the economy.
You may be surprised to hear it, but some investors have made money out of Japan lately.
Over the last three years, unit trust Neptune Japan Opportunities has returned an impressive 55%, while Invesco Perpetual Japan delivered 20%.
So the country isn't a complete investment wasteland. The problem is that positive returns are the exception rather than the rule. Over the last one, three and five years, Japan has returned -1%, -7.7% and -4.7% respectively, according to Trustnet.com.
And over the last 12 months, Neptune's fund has fallen a painful 24%. If you have made money out of Japan lately, you belong to a small and exclusive club.
So is now a good time to join?
Lost
Japan's problems during the past two "lost decades" have been well documented. A day doesn't pass without somebody warning us that the West is set to suffer an equally grisly fate. Japan is a deadly warning sign on the road to deflation. When your economy becomes a dire omen to the world, you know you are in trouble.
The Bank of Japan and Japanese politicians have been trying to revive the economy for years, with scant success. The Nikkei Index peaked at 38,957 in 2009 and 21 years later it stands at a meagre 8,927. In the interim, the country has been tipped for a revival after revival, but all of them fizzled out.
I remember the days when we were urged to emulate Japan. Nobody wants to now.
Yen 10
Japan is giving the economy a fresh fiscal and monetary blast. At an emergency meeting on Monday, the Bank of Japan on Monday announced an extra Y10,000bn for a special loan facility for lenders, while the government outlined a Y920bn package of stimulus measures.
This follows the recent global equity sell-off which led to yet another jump in the value of the yen, seen as a safe currency haven. The yen is now nearing a 15-year high, making Japanese exports expensive, especially in comparison to China. The move appears to have failed, with the yen strengthening against the dollar over the last two days.
Big in Japan
While markets debate whether the US and UK are set to launch a fresh bout of quantitative easing, the Japanese have already taken the plunge in a desperate bid to stamp out the slippery deflationary slope which has seen prices falling for 17 months in a row.
Its recent recovery now looks increasingly shaky. Japanese GDP growth slowed to just 0.1% in the second quarter, compared to 0.6% in the US, 1.1% in the UK and 2.2% in Germany, according to OECD figures.
The country's ratio of public debt to GDP is a frankly bewildering 225%, which makes the UK (68%), US (67%) and Greece (130%) look like paragons of fiscal solidity.
The only reason it hasn't suffered a sovereign default is that a high proportion of this debt is held by Japanese consumers in the form of government bonds, rather than foreign countries and institutions.
Yer old!
To add symbolic insult to economic injury, Japan has finally been overtaken by neighbourhood rival China as the world's second-largest economy. With Japan stagnating for two decades and China are growing at 8% a year, it was going to happen sooner rather than later.
Japan's GDP was $1.29 trillion in the second quarter, while China edged it at $1.3 trillion. China is on course to overtake the US by 2030, unless demographics derail its destiny.
Japan is already under a demographic death sentence, as its ageing population and rock-bottom fertility rate hammers nail after nail into the coffin of its post-war economic miracle. It is hard to believe that Japan was once a global exporting powerhouse, with the world's largest stock market capitalisation and most expensive real estate.
Credit where it's due
Some fund managers continue to spy opportunities in Japan. Stephen Harker at GLG Japan Core claims the lost deflationary decade could actually benefit Japanese companies, who have been forced to restructure, and are now churning out cash. The Japanese financial sector has withstood the credit crunch, having learned from past mistakes.
Harker also claims that Japan is at the bottom of a "once-in-a-lifetime credit cycle", while the West has only just passed the top. This puts Japan in a relatively stronger position.
Other analysts note that the yen is unsustainably high, and if it drops from its current peak Tokyo stock markets could reap the benefit. The drawback is that UK investors will face a currency hit if that happens.
Turning Japanese
I gave up on Japan years ago, and unlike most of my sell decisions, I haven't regretted it for a moment.
Interest rates can't go any lower, it has the highest debt in the world, domestic demand is sliding and the population is shrinking fast. Without effective action, Japan is dying. Its population is set to fall from 125m to 95m by 2050, unless it trains its population to accept immigrants, or start reproducing.
One interesting thing about fertility rates is that developed countries that don't give women strong workplace and childcare rights find themselves punished by a baby strike. Japan and Italy, with total fertility rates of just 1.21 and 1.38 respectively, are two obvious cases. I find it amazing that they don't find it harder to turn this around.
Ageing Japanese consumers may be good news for Zimmer or replacement hip specialists Medtronic, but it is terrible news for Japan, or anybody holding Japanese equities.
China sometimes wakes up in a cold sweat, dreaming it is turning into Japan.
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