Is Japan Correct Analogy for U.S. Economy?
By Grey Owl Capital Management (Guest Contributor) Thursday’s Financial Times featured an analysis by Lindsay Whipp titled “A gloomy anniversary for the Nikkei.” Most investors already know the punchline: The Nikkei, Japan’s primary stock market index, reached a peak of 39,000 twenty years ago. Today, the index hovers in the mid-10,000s, almost three quarters below its peak. Given the United States’ similar issues with high levels of debt, stock market (over) valuation, as well as similar monetary and fiscal responses to “fix” the initial credit crisis, investors in US equities should ask the question, is Japan the correct analogy? Unfortunately, in many ways Japan does appear to be a reasonable corollary. Post World War II, from 1950-1970, Japan’s GDP grew at a real rate of 8.4% annually on a per-capita basis. It slowed to a still stellar 4.1% rate from 1970-1990. Then, the bubble burst and from 1990-2004 Japan’s economy grew at an average rate of 1%. The Japanese market’s slow bleed
