E Japan Stocks

I'm betting on Japan. I call Japan an attractive market but I am not heading back into 1990 when the yen and the Tokyo exchange reached ridiculous highs. But there really are improvements in both the economy and the corporate side in Japan. Morgan Stanley says that while Japanese companies continue to lag in terms of return on equity, the gap since 2012 is now half as bad as before, at 9.8% vs 11% for the rest of the world. And it is closing fast.

The main reason is that corporate taxes were cut and interest rates fell. But there also was corporate initiative at work: controlling costs and maximizing the use of assets. This week's Economist spells things out.

The economy is healthy and contrary to myth, deflation has ended. Unemployment is now 2.3% and there are more vacancies than job-seekers. Moreover, another myth has bitten the dust: Japanese women are now more likely to be in the workforce than American ones! Japan's per hour output is also among the highest in the developed world, according to the Conference Board.

While corporate Japan is still not exactly shareholder friendly, most companies now have independent directors and ladies on their boards. The habit of holding many shareholder meetings on the same day is coming to an end.

The demographics are still negative, with the developed world's largest aged population, although other countries (including the US) are catching up with geriatrics. As an early senior economy, Japan has a lead in expanding into foreign solutions, notably its major neighbor, China and other Asia sites. This is a strategic choice, because of a declining Japanese workforce. So too is automation, a Japanese sector I dote upon. Both these trends should support higher stock prices in Tokyo.

More on this starting with a half year report from one of our Japanese companies emphasizing the new Japanese expansion and the focus on the aged, plus news from other firms from our Japanese stock picks.

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