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And the Winner Is…

05 Oct 2008 10:54TraderF

Over the past few years we have largely dismissed Japan as a manufacturer of high quality goods, but not really important on the world financial stage.  This is about to change in a dramatic way.

 

In the early 90’s Japan had its own property bubble.  While the Japanese Government took some measures to fix the problem back then, in large part the banks were simply left to work it out themselves.  The Japanese learnt a hard lesson and have not made the same mistake as the US and Europe. 

 

This week Mitsubishi UFJ Financial Group, Japan's biggest bank by market cap, sealed a deal to acquire 21% of Morgan Stanley for $9 billion. Last week, Nomura Holdings Inc., Japan's largest brokerage, acquired the Asian, European and Middle East operations of Lehman Brothers Holdings Inc. for about $225 million. As American International Group Inc. prepares to release a list of assets for sale, analysts say Japan's insurance giants could be among the buyers.

 

Japanese companies, which have returned to health over the past decade, are seeking bigger growth opportunities overseas. Banks, with deposits from Japan's retirees ballooning just as their traditional domestic lending business is stagnating, want to put their money to work. And Japanese savers, looking for an alternative to super-low yields in Japan, are increasingly investing in foreign stocks and bonds.

 

It sounds like history repeating itself with Japan coming to the rescue of the US excessive consumption.  The Japanese people have a long tradition of saving that the west could learn a lot from.

 

This trend is being starkly demonstrated in the Currency Markets where the JPY looks strong against all other currencies and most particularly strong against the USD [FOREX:USDJPY].  While the JPY bears will point out that a weaker US will impact Japanese manufactures, and this is true, we are now seeing the emergence of a complete new phase where Japan uses its savings to buy cheap and distressed assets at bargain prices.

 

Many offshore brokers can give you access to Japanese shares, failing this the JPY looks like a hot buy especially against the USD.

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