How Can Businesses Profit From The Next Phase Of Japan’s Comeback?

However, the government remains cautiously upbeat and believes that an improved outlook for jobs will result in growth later this year. “While there are risks, such as overseas developments, we expect the economy to head toward a moderate recovery thanks to the effect of the various [stimulus] steps taken so far,” Amari said.

What these steps do not include is the printing of money (quantative easing for those referring to a glossary of spread betting and trading terms), which lots of investors had hoped for.

Instead, the Bank of Japan will keep printing just 80 trillion yen a year until 2017. But before investors start looking for opportunities elsewhere, there is still profit to be had from the next phase of Japan’s economic comeback.
Why printing money isn’t the answer

Following a decision not to print more money than he is already doing, several investors wondered how Japanese central bank governor Harukiko Kuroda would reach his target of getting inflation back up to 2 per cent a year.

After all, ever since he started using the policy, the Japanese stock market has enjoyed superb growth, while the yen has weakened from less than 80 to the US dollar to about 120. Inflation is below 0 per cent, economic growth has been poor, while forecasts for the next two years have also been lowered.

Even so, Japan has already printed an untold amount of money, which according to Reuters is “equal to 70 per cent” of its GDP. This is in comparison to 25 per cent by the US Federal Reserve, and 20 per cent by the UK’s Bank of England.

But, along with Kuroda’s reservations about printing more money, there isn’t much point to this financial exercise, as the world’s third-largest economy is actually – in spite of its issues – quite healthy.

Japan’s economy is an investor’s opportunity

With unemployment at just 3.4 per cent and the job-to-applicant ratio of 1.24, the highest it has been since 1992, it is only a matter of time before wages rise, which will increase current consumer spending even more.

Also, if you ignore Japan’s tumbling energy prices, inflation is actually above one per cent a year. Therefore, investors can have confidence in Japan’s economic revival, as it is the result of more than just money printing.

The collapse in the yen has boosted the profits of Japanese exporters but, in turn, this should also result in greater corporate investment, more jobs, and better wages. With rising disposable income, consumers could well be splashing the cash at any opportunity.

So, if businesses want to profit from the next phase of Japan’s comeback, they must focus on the opportunities offered by country’s domestic revival which, in spite of fears of a recession, is now ticking along quite nicely.