How is PIMCO’s global secular forecast shaping the firm’s views on Japan specifically?
Masanao: We believe global growth of 4-5%, led primarily by emerging economies, is inflationary rather than deflationary for the Japanese economy. Japan primarily exports capital goods and production goods. If you look at numbers for last year, more than 70% of Japanese exports are either capital or production goods, rather than consumption goods, and are mostly destined for Asia, Europe and the Middle East. In other words, infrastructure demand in the emerging market economies continues to fuel Japan’s heavy industry, helping to offset a cyclical decline in U.S. demand for consumer goods, notably Japanese autos.
