#头条讲真的#
At the beginning of the new year, the carnival of the Japanese stock market continues.
The Nikkei index broke through the 36,000 mark for the first time in 34 years, its best performance in 22 months, and the Japanese stock market capitalization surpassed that of the Shanghai Stock Exchange and returned to the first place in Asia.
Despite signs of overheating, Japanese stocks remain sought after by global investors, with foreign investors buying a net 1.2 trillion yen ($8.1 billion) last week, a new high in nearly three months, according to Japan's Ministry of Finance.
Japanese stocks continue to rise, and Morgan Stanley even directly said that Japan is about to enter a "permanent bull market", which makes people feel quite dreamy beyond reality.
Why?
As we all know, Japan's bubble economy collapsed in the early 90s, and since then it has ushered in the "lost 30 years", and the Japanese stock market has also experienced a bear market for more than 20 years.
Today, the Japanese stock market has started a continuous upward trend, hitting new 30-year highs almost every day, and is starting a sprint back to the peak of 1989.
Can this "feast" last, and can Japan get out of the 30-year trap?
Why is the Japanese stock market booming?
The stock market is a barometer of the economy, and this round of carnival in the Japanese stock market originated from the improvement of two major economic indicators.
First of all, the GDP growth rate is impressive.
In August last year, Japan's quarterly GDP achieved "three consecutive increases", with an annualized rate of 6% month-on-month, not only exceeding the 2.7% in the first quarter, but also exceeding market expectations of 4.2%, getting rid of the downturn in one fell swoop.
At the same time, the deflationary problem that has plagued Japan for many years seems to have come to an end:
Some time ago, the Japanese Cabinet released the 2024 annual economic outlook report, which predicts that the inflation rate will reach about 2.5% in fiscal 2024, and this is the first time in 30 years that Japan's prices have risen by more than 2% for three consecutive years.
Many people may still have the impression that at the beginning of 2023, the Japanese government asked for an across-the-board salary increase.
As a result, Toyota took the lead and decided to pay 6.7 months' monthly salary as a bonus, and also raised the wages of part-time employees.
Immediately after that, the Electrical Machinery Union Labor Union demanded a monthly wage increase of more than 7,000 yen, and the Textile Chemical Food Distribution Service Labor Union proposed a 6% salary increase.
According to a business survey in Japan, the union decided to raise wages by an average of 13,000 yen in 2023, an increase of 3.9%, after consulting with 92 large companies in 15 different industries.
Therefore, along with rising wages and higher inflation, the Japanese economy has exceeded expectations, which in turn has pushed the Japanese stock market higher, which is favored by foreign investors.
The Japanese model of low growth and low inflation
Since Japan's economic growth tends to be optimistic, does it mean that Japan has come out of the "lost 30 years" and is full of new vitality?
To understand this, we must first understand what the real "Japanese model" is.
From 1996 to 2022, the scale of Japan's foreign investment increased by 8 times, and under the banner of "rebuilding Japan overseas", a huge amount of wealth was harvested by internal residents.
As a result, a large number of residents are highly leveraged, and asset prices have shrunk sharply, and neither ordinary Japanese residents nor Japanese companies dare to increase leverage indiscriminately, resulting in the Japanese economy becoming a pool of stagnant water and ushering in the "lost 30 years".
In order to prevent a further balance sheet recession, the Japanese government was forced to adopt extremely loose monetary and fiscal policies to avoid deflation and a major recession due to insufficient demand.
In the process, the Japanese government borrowed money from the central bank to monetize the fiscal deficit indirectly, while at the same time using the money for ordinary residents through a high-welfare social policy.
In addition, Japan itself is a modern industrial country, and it can rely on some high value-added industrial products to exchange for cheap goods it needs from the world, ensuring sufficient supply in the domestic market, thus ensuring the equilibrium between commodities and currency.
Therefore, we can find that Japan has maintained a development model of low inflation and low growth over the years, which is the so-called "standing still", and the most critical factor that determines whether the Japanese economy can get out of the 30-year trap is not the performance of the financial market, but the competitiveness of the real economy.
Can Japan Get Out of the 30-Year Trap?
Despite the fact that Japan's financial markets are booming right now, and even Morgan Stanley invented a new term called "permanent bull market", it seems premature to say that Japan has escaped the 30-year trap.
There are two main reasons for this:
The first is the competitiveness of the real economy, especially the manufacturing sector, which Japan has not fundamentally improved.
As we mentioned earlier, one of the reasons why Japan is able to maintain the balance between goods and currencies is by selling high-value-added products in exchange for cheap goods from all over the world.
However, with the intensification of external competition, the competitiveness of Japanese industrial products is declining, such as the automobile industry and home appliance industry, which we are familiar with, and Japanese brands are suffering more and more impact.
In the event of a downturn in the real economy, relying solely on finance to sustain economic prosperity is a lesson from the bubble crisis of the 90s, and the consequences of today's lack of strong manufacturing support in Japan may be even more severe.
The second is Japan's debt problem, which has almost reached a critical point.
At present, the size of Japan's national debt is as high as 1,280 trillion yen, which is 2.5 times the size of GDP, and at an interest rate of 0.5%, it will have to repay 6.4 trillion yen per year with interest alone.
What is this concept?
The Japanese government's annual fiscal revenue is only 67 trillion yen, which is equivalent to nearly 10% of interest expenses alone.
Then there will be a question here, if Japan continues to maintain a loose monetary policy, more and more money, once it leads to economic overheating or stagflation, will it dare to raise interest rates?
According to the estimate of the Japanese Ministry of Finance, as long as the interest rate on government bonds rises to 1.5%, the Japanese government will go bankrupt in a few years, and Japanese government bonds will become a complete bad debt, and the bomb will be detonated.
Therefore, from the perspective of debt, the Japanese stock market now lacks basic support, and the risks cannot be ignored.
Write at the end:
With the rising stock market and the influx of overseas investors, the Japanese economy seems to have come out of the "lost 30 years".
But the problem now is that Japan's real economy, especially manufacturing, does not have the strength to match, and relying solely on finance to support the economy is likely to brew a bigger crisis.