Taps Coogan – February 2nd, 2024

It’s taken 35 years, but Japan’s benchmark Nikkei Index has finally gotten back near its 1989 bubble high. Via Giovanni B. Ponzetto:

I actually was already working in finance in 1988 so my then colleague and I saw the Nikkey peak, almost reaching 40.000. It's not there yet.(/) pic.twitter.com/BF3e30azoH

— Giovanni B. Ponzetto – 🇨🇦🇮🇱 (@gbponz) February 2, 2024

Of course, the TOPEX Total Return Index – a broader index of Japanese stocks that captures dividends, eclipsed its 1989 high a couple of years ago.

The #Topix total return, however, is comfortably over that. Dividends, and a wider representation in term of companies, did the trick.(/) pic.twitter.com/dPSiUtfFOq

— Giovanni B. Ponzetto – 🇨🇦🇮🇱 (@gbponz) February 2, 2024

In either case, while very long-term returns in Japanese stocks have been dismal, returns since the start of ‘Abenomics’ in 2013 have been relatively strong. It’s a reminder that while ‘Abenomics’ failed to boost economic growth (GDP has barely grown since 2000) or reverse Japan’s demographic decline, printing money to buy stocks is great for stock prices. And since Japan’s ever-worsening demographic crisis is a deflationary blackhole (Japan has had nearly the lowest inflation among developed economies despite doing essentially no monetary policy tightening), there is seemingly no end in sight for Japan’s ability to keep printing money and buying stocks.

On top of that, having allowed Taiwanese, then Korean, and now Chinese tech companies to thrash them for 20+ years, some of the once-great Japanese giants have returned to meaningful top line growth in the last few years owing to long-delayed changes in governance and strategy.