Active Investing in Japan

The author’s intent is not to be misleading, but rather to be as frank as possible, regarding the longstanding debate of whether or not Japanese stocks are truly undervalued. In short, the answer is  no. I no longer believe Japanese stocks are undervalued, not to the extent that I once did, and not to the lengths that some pundits and money managers try to make a case for. In fact, I would argue that Japanese stocks may best be described as being closer to fair value instead of being deeply undervalued. I mean Japanese stocks, for the foreseeable future, may be destined to be “undervalued” by traditional metrics, but fairly valued by the market and in relation to the economy. continue reading…

No surprise that the BoJ kept rates unchanged at 0.1%. That a return to deflation is expected comes as no surprise either, since in reality, deflation never really ended, even when commodities surged last year. Meanwhile, the Japanese are left in the same predicament, with next-to-zero returns on deposits and no real need or desire to consume beyond necessities. Unenviable circumstances for both individuals and businesses, alike.

The “borderless conventional banking stupidity failure” refers to the clipped text below. With exports plunging and domestic demand continually depressed, it’s unnecessary to obsessively cater to the big players idling plants and curbing expansion. Rather it’s of utmost importance to ensure that lending not only continues, but does so without excessive stringency, at the SME and individual level, in order to have any hope of minimizing the effects of prolonged deterioration of the economy. This is a simplified argument, but the crux of the problem, especially in Japan (or I could say “even in Japan” despite all the cash held by companies and individuals — innate risk aversion exacerbates the problem). And again, a truly unenviable situation (regarding the lending climate), but in this case, one not so different than what we are witnessing, say for instance in the U.S.

clipped from www.marketwatch.com BoJ holds rates unchanged; sees deflation ahead The BoJ’s quarterly survey of bank-lending practices, released on Thursday, showed large financial institutions lowered lending standards for large firms, kept them unchanged for medium-sized firms and tightened them for small firms and households.