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Apr 20, 2013

Shinzo Abe on Japan’s Financial State this 2013

2012’s biggest surprise has been the robust rally in the Nikkei 225 Index (NKY)- stock market index for the Tokyo Stock Exchange (TSE). Prime Minister Shinzo Abe has a promise to light a fire under the economy with a massive fiscal effort and pressure the Bank of Japan to set a 2% inflation target and accelerate bond buying, he made the promise when he was an incoming prime minister last year.

December 19 last year, the Nikkei broke through the 10,000 mark in early trading in Tokyo and is up about 10% on the year. The strong yen still remains a worry up to today. Due to Japan’s world-class debt mess, now clocking in at about 220% of GDP and so is it’s rapidly aging population, now the third world’s biggest economy are in slow lane at the moment.

But this is not what prominent analysts see, James Hunt of Tocqueville Asset Management, see better times ahead for Japan and its stock market. According to Hunt, in a recent note to clients points out that over the last 12 years, Japanese corporate profits, cash flow and return on equity have all increased even as stock prices have stagnated. As a result, ‘the price to earnings ratio for profitable Nikkei 225 companies has gone from 24x to 15x, while the price/book value has compressed from 1.7x to 1.1x and the dividend yield has increased from 0.8% to 2.3%.” Now, the question is, is this prediction correct at the moment. It is too early to say though, anyway 2013 just started.

Japanese stocks are a bargain at least for the next couple of years, says Jim Rogers, Singapore-based investor. He argues that the Nikkei trading is in the same range as it did in 1983. Last year he recommends looking for Japanese stocks that can serve as a proxy play for China and other faster growing economies in Asia because Japan has massive debt problems. And he also suggested Japan must have a quick exit in middle of this decade.


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Posted: Saturday April 20, 2013, 5:49 pm
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