This week, I had several meetings with Japanese financiers. Some British friends, who are also financiers, came from the City of London to Tokyo. I helped them to get connected to the Japanese financial world.
To be honest, the both British and Japanese sides don’t understand what’s really happening in Japan. The former didn’t hesitate to express its strong doubt of validity of the current “ABENOMICS”. One of my friends from the City even said, “The GOJ should be careful, because “cure” is sometimes much harder than “disease” itself.”
The latter still believe emerging markets could survive and maintain its position as motors for the future world order. They were really delighted to explain their business success (at least so far) in Asian emerging markets after European and US companies got rid of them.
While listening to their conversations, I asked myself who will be the real winner of the on-going game called “financial meltdown.” The US mega banks?? Absolutely, “No”. The old financiers from the City of London?? Well, maybe a part of it. But they still believe they could control whatever they want in the market, which is no longer the case. Guys from emerging markets?? I don’t think so, because they totally depend on the US and European markets. Once the US will decide to go tapering the QE, all the emerging markets will get seriously troubled.
How about Japan? “Yes” and “No”: I would say “Yes”, because the current “Japan problem” is not financial one as the western powers have, but demographic one. How to go beyond the accelerated ageing society is the very issue the Japanese must tackle now. From the foreign view point, the GOJ started the ABENOMICS because of deflation for almost 20 years after the so-called “Heisei Bubble” between 1987 and 1990. However, you can’t explain only based on that why the GOJ has chosen the year of “2012” as a starting point of the reflation strategy.
The reason is quite simple. In 2012, the generation “Dankai”, which was born between 1948 and 1950 in Japan, slowly began to get its pension from the GOJ. It will take till 2015 that all the generation “Dankai” will be entitled to be paid by the Japanese pension system. The official debt of the GOJ will be accumulated drastically in the course of time. That means the moment of the truth in the context of Japanese fiscal and financial disaster will come up after 2015.
Just in case, the GOJ seems to have begun preparation for its possible default without declaration to the international community. The ABENOMICS is only a part of such maneuvers.
Let’s get back to the previous question: “NO”, because even the majority of the Japanese can’t understand this type of hidden financial strategy undertaken by the GOJ, or rather “by the Ministry of Finance”. They still don’t believe the GOJ is capable of squeezing the Japan Bubble from the on-going, world-wide financial meltdown. Instead, the Japanese, mainly retail investors, continued to buy their stocks dramatically since the autumn of this year, while the foreign, mainly US and British institutional investors, tried to buy as many Japanese stocks as possible till now.
The scene has obviously changed in the Japanese stock market yesterday. Even though yesterday was the last SQ settlement day in the Japanese stock market in this year, the Nikkei 225 index has risen as you see below:
As my closest alliance partner, Mr. “HKD”, pointed out previously, the sea change will be recognized publicly after December 19. The historians will write in 5 or 10 years that “December 14, 2013” was actually the starting point of the so-called “Japan Bubble”.
The point is the majority of the Japanese, who are lack of financial and historical knowledge, aren’t aware of it. When they will be sufficiently enlightened to take advantage of such an historical opportunity, the Pax Japonica will begin. If not, the Japan Bubble will be continuing only as a asset bubble only for 2 years and then lead the Japanese society to a fatal collapse.
Still, my adaptive unconscious tells me there could be a chance for the Pax Japonica. Everybody feels that but can’t explain in a logical manner, I suppose.
There is a matter which complicates all the situation: The Japan Bubble, which has just begun, will be divided to two phases. The one will continue based on the current depreciation of JPY till the Great Middle East War will break out. Another will get started after the war, even based on massive appreciation of JPY. That could resemble the “Heisei Bubble” from 1987, which began within 2 months later after the so-called Black Monday in October 19, 1987.
You can easily imagine mass media will scream, “The Japan Bubble, and automatically the ABENOMICS itself, just came to an end with the dramatic collapse of world market after the Great Middle East War had broke out.” It’ll not true. The second, and real stage of the Japan Bubble will begin with the massive appreciation of JPY as the very safe haven for financiers from all over the world. Seeking for JPY will be gradually changed into search for reliable assets in Japan: Japanese stocks and real properties.
You never know the Japan Bubble has just begun. You can’t even believe in such a simple fact. But in a week, you will be aware of it. The Japan’s future will be really shining, as the “Morning MUSUME” sang in 90’s.