JETRO Focus Newsletter March 2006

JETRO's Focus Newsletter series provides readers with a bi-monthly snapshot of Japan's macroeconomy, as well as other important topics and trends. It is designed to analyze current developments, including those relating to Japan's economy, its business, financial, investment and political environment, as well as relevant social and cultural themes. 

Recent editions have covered issues including rising entrepreneurship and investor interest in Japan, the economic integration of East Asia, changing business and corporate practices, structural and corporate reform and the potential impact of postal savings reform. Subscribe online to JETRO Focus

 Download March 2006 newsletter (386 KB) 

Japan Introduces Catalysts to Promote Growth and Reform
Investor and business interest in Japan remains strong -- backed by solid macro, industry, and firm-level data. While acknowledging this strong performance, some analysts have begun to question whether Japan can build on this positive momentum, and if so, what will be the factors that will sustain this advance moving forward.

Analysts Identify Catalysts that can Sustain Japan's Recent Advance
Strong Japanese stock market performance in 2005, record corporate earnings, and evolving monetary policy have caused some analysts to question whether there are additional upward gains still to be achieved in Japan. This has led some strategists such as JP Morgan's Hajime Kitano to suggest investor's lock in their profits.

Japan Offers Positive Economic Data on Many Fronts
In the 4th quarter of 2005, Japan's economy grew 1.4% (5.4% annualized), a rate far greater than the 0.3% experienced in the U.S. and 0.4% experienced in the European Union. Japan's 4th quarter performance derived largely from domestic sources such as consumer spending and business investment.

End of Quantitative Easing in Japan and its Implications
In response to the positive news regarding the end of deflation as well as Japan's solid economic performance, the BoJ moved on March 9th to end its quantitative easing (QE) policy, initiated in 2001 to support a troubled financial system, combat deflation, and facilitate government and corporate borrowing.

Corporate Change and Restructuring Continues
Even before the BoJ moved to end QE, many Japanese corporations had begun to take steps to rationalize their operations, enhance their domestic and international competitiveness, and increase their returns to shareholders.

Japanese Government Moves to Improve the Business Environment
The Japanese government continues to adopt, and implement a variety of policies designed to improve the environment for foreign and domestic business. Heizo Takenaka, Minister for Internal Affairs and Communications, for example, revealed in a Financial Times interview that he had convened a special taskforce to investigate how Japan might reform business practices and regulation in the telecommunications and media sectors to double or even quintuple revenues for players in these sectors.

Japan Further Develops Its Capital Markets and Security Regulation Infrastructure
Akira Kojima, Chairman of the Japanese Center for Economic Research and a Special Editorial Advisor to the Nihon Keizai Shimbun, wrote in the January/February 2006 edition of Japan Economic Currents that Japan had to develop its capital markets to ensure funds were available for risk takers and firms with an entrepreneurial spirit.

Japan Continues to Present Strong Opportunities for Investors
Analysts such as Robin Griffiths at Rathbones Investment Management, continue to see opportunities in Japan for lucrative gains, both in respect to the market as a whole and especially in sectors such as retail, mining, property, and financial services.