Turning Japanese (Part 1)

Has Japan turned around?

During the ‘80s Japan’s market was booming. Their export-led economy was capitalizing on the growth in world trade, their stock market grew 10-fold from 1974 to 1989, and the market value of the imperial palace in Tokyo was supposedly greater than that of the State of California. Japan, Inc. was considered an economic juggernaut—a model of targeted subsidies and managerial expertise that could dominate any market it chose to.

Then the bubble burst and things went into a tailspin. Even though their economy continue to grow, the stock market fell by half and went into a 20+ year bear market. Last November the Nikkei Average was 80% below the record high it set in December of 1989. Japan’s economy has become a byword for the perils of deflation and economic stagnation.

But if inflation and deflation are primarily monetary phenomena, can monetary intervention cure them? That’s what we’re about to find out. Last Fall Prime Minister Shinzo Abe articulated his economic policy: a regime of monetary expansion and deficit spending dubbed Abenomics. The yen fell by over 25% and the stock market doubled.

Japan’s new intervention is a grand experiment. We will soon see where the experiment leads.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-06-17T10:27:42+00:00 June 17th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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