of Japan's history from the time it mingled with western
civilization and after World War II led to a point where Japan would
become the second largest economy in the world. Its strength had
reached such highs that the Tokyo Stock Market at one time became the
largest (in total capital value) in the world.
heyday property prices rose sharply. There was a time when it was estimated
that the value of real estate in Tokyo alone was
worth more then all the real estate in the entire state of California!
permitted to make loans against these new higher real estate values. During
1987 and 1988, loans secured by real estate
accounted for over half of all new Japanese bank financing. The stock
market boomed, with the Nikkei index reaching an all time high of
38,900 by the end of 1989.
When the Bank
of Japan decided that the real estate expansion needed cooling off, it
raised interest rates. During the first half of 1989,
the Japanese discount rate went from 2.50% to 4.25%.
were more devastating than anyone could have expected. The market realized
that Japan was now a mature economy with all the
problems that accrue to nations in that state (i.e. high wages,
increased social turmoil, reduced growth, etc.), but shares and real
estate were selling at earnings ratios of high growth emerging
1990, the market started to fall. In March the market collapsed and lost
almost 30% of its value, with the Nikkei falling to
28,000. This led to a serious recession that lasted for a decade and a
Now the Japanese market is awake again.
invested in the Jyske Invest Japanese equity fund in late August 2005 when
a unit was worth 7,888 JPY. Now just a little over
four months later the unit price is already 10,068, an increase of
The Tokyo market's
recent strength reflects investor optimism about growing Japanese corporate
earnings, not only for the next fiscal year
starting in April 2006, but also for the following year.
are prompting more expectations and this upwards drift is likely to stay
solid for the time being because there are no
factors to dash these hopes.
More details on Japan are at http://www.jref.com/topsites/index.shtml
This has led
Japanese fund managers to raise the weighting of equities in their global
portfolios to the highest level in seven months in
December, going overweight in domestic shares, a Reuters poll showed.
prices also reduced perceived risks in the Japanese equities market.
has been led by domestic demand and an increase of local and foreign investors. This
trend is also likely to grow for some time because Japan’s Nikkei
average shot up 40 percent in 2005 compared to the U.S. Standard and Poor's
500 Index, which rose about 4
further interest rate rises and a housing market downturn in the United
States reduced investors' appetite for American
shares as well.
would have happened if I had borrowed yen and used the MultiCurrency Sandwich. Yen loans are 1.62%. Had
I invested $100,000 and borrowed $200,000 I could have purchased almost
4500 shares. Today
they would be worth about $386,000. Interest costs and fees would have
been in the $5,000 range so profits of $80,000 or a profit of 80% in
This is why
25% of the Asian MultiCurrency
Sandwich we track is in
Japan via the Jyske Invest Japanese Equity fund.
You can get
more details on this fund from Thomas Fischer at FISCHER@jyskebank.dk.
Until next message, good global investing!