Turning Japanese (Part 3)

Does Japan even matter anymore?

Twenty years ago Japan’s economy, was the second-largest in the world. Their export machine dominated global trade. Europe was an afterthought—divided and struggling with “Eurosclerosis.”

But now it’s Japan’s economy that’s mired in stagnation. China grew past them as the second-largest individual economy years ago, and the united Euro-zone has more potential than either. Japan’s population is ageing and declining. With an insular economy and an overvalued currency, today Japan seems mainly useful as a cautionary study in the dangers of deflation.

But that was before Abenomics. Japan is home to much world-class engineering and precision manufacturing. By deflating the currency, Abe hopes to boost Japan’s competitiveness. And a resurgent Japanese economy would prove a ready market for cheaper foreign goods, if Abe can create the political will to open Japan’s borders to imports as well as revitalize exports.

A resurgent Japanese economy would be good for the global economy. If it’s good for Toyota, it just might be good for everyone.

Douglas R. Tengdin, CFA

Chief Investment Officer

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