Japan is currently the third biggest economy in the world, behind US and China. The Yen is also the third most traded currency in the financial markets, behind the USD and the Euro. It also has the 8th largest gold reserves in the world. Japan has done a very good job in its cultural export – from anime to food, from tourism to its language. Japan is the role model in many aspects. For a country with such a resume, it would seem that Japan is indeed a real solid country to invest in. In fact, Warren Buffett had increased his investment in the country.
However as mentioned in the earlier article, just because Warren Buffett did it does not mean you can nett a profit by blindly copying him. In fact, I would not invest in Japan. Take note that this is different from trading in Japanese financial instruments, such as the Nikkei 225, the Yen or even the stock market. Basically, an investment is going in for the long term, while a trade is a quick-in-quick-out kind of transaction.
Below is the list of reasons why I would avoid investing in Japan.
Societal And Career Hierarchy
While it is important to respect the elderly, in Japan and South Korea they take it to the extreme. The elderly are to be respected, even if they are unreasonable and nonsensical, disturbing others with their stupid antics. In the corporate world, the Japanese operate based on an age-based system rather than meritocracy. While I often made a mockery of meritocracy, in its basic and untainted version it does help the commoners climb up the ladder based on their capabilities. The Japanese system has 2 major flaws – the discrimination against women and young people.
Women have a very low status in Japan, and married women are often intentionally given a much lower pay for the same work done by their male counterparts as a way to get rid of them. While most women do not intend to climb too far up the corporate ladder and choose instead to focus on their family, in modern day society where brain power and skills are used for production rather than manual labour, discrimination against women cuts the Japanese capabilities significantly. As a sidetrack, India also has the same issues, where they not only discriminate by gender, but also by caste and a ton of other standards. I will also never invest in India in its current state.
Secondly, corporate workers are promoted based on seniority in the company instead of merit. As most Japanese stay with one company throughout their entire career, much like how Singapore was in the 80s and 90s, we have an outcome where the older workers fill up the management roles and will hog up the seat till they retire. And the management, being more senior in age and rank, cannot be challenged. The outcome of that is a bunch of incompetent old men who are out of touch with the ground reality making a bunch of questionable decisions. These old people are in a system where as long as they do not make any mistakes, they will retain their position. Hence you will often hear statements such as Japanese companies are conservative – a result of a management too scared to make decisions that may potentially fail. Do more, fail more. Do less, fail less. Be safe and retain the position which they spent the last 30 years climbing up to get.
This leads to a very big problem.
Crippled Corporates
When a company becomes too conservative, it cannot compete globally. Any advantage that it has will be lost in a matter of time.
One classic example of a big missed opportunity is the keitai phones of Japan in the early 2000s to the early 2010s, before the iPhone and Android phones dominated the market. Keitai phones were way advanced for their time: e-mail capabilities in 1999, camera phones in 2000, third-generation networks in 2001, full music downloads in 2002, electronic payments in 2004 and digital TV in 2005. People were tapping their phones to pay for public transport and surfing the internet on their phones.
I remembered spending near $800 on a Softbank Sharp 912SH which comes with an LCD screen that swivels 90 degrees, GPS tracking, a bar-code reader, digital TV, credit card functions, video conferencing etc. Admittedly, quite a few functions were unusable for me and I had to pay for someone to unlock the phone. In total I got 2 Softbank keitai phones and 1 Docomo Android phone (this was after the era of keitai phones) before I gave up completely simply because I was at that age where convenience is everything. It was way too cumbersome to use a Japanese phone overseas.
Yet, when the iPhone came out with functions far less capable than what the Japanese had at that time, the world went crazy, ignorant of what the Japanese had achieved. The reason was simple: Despite huge opportunities, the Japanese refused to venture out to the world. The world did not know that somewhere out there, the technology was already achieved long ago. If Softbank and Docomo had came out earlier, Apple would have faced a far stiffer competition.
Political Cowardice
The US has a firm grip on Japan after Fat Man and Little Boy dropped on Nagasaki and Hiroshima. Currently Japan cannot be considered to have its own military, and its Self-Defense Forces is a joke. It has to pander to the US despite all the nonsense that the US has done to it.
In the recent G7 meeting, it was rumoured that Biden had threatened Japan Prime Minister Kishida to be US’ sacrifice. In a very brief summary, US economy is on the brink of collapse. In 2008, US had diverted the economic bubble to China (as evident by the sharp increase of their property prices), but today China refused to do so anymore. Someone must be sacrificed. US is never one to show loyalty to its allies. In terms of economics, US wants Japan to be the sacrifice. In terms of politics, US wants Japan to round up all the smaller countries in the region and have them show loyalty to the US. In terms of warfare, the US wants Japan to continue supporting Ukraine so that Russia can be torn apart and China lose an important ally. In terms of production, Japan is also roped in to the Chip 4 alliance in order to suffocate China. There are many more examples.
While it is too long to explain all of the above in detail here, let us look at one aspect of the economic issue. Ueda Kazuo, the current Bank of Japan (BOJ) governor, was not a fan of Abe Shinzo’s excessive monetary policy and had said that the BOJ should consider an exit from it. As such, when he took over as head of BOJ, there were hopes that the Yen, which had already touched a 32 year low against the USD in October 2022, would rise up again. However, after taking over, Ueda not only did not reverse the stance, it doubled down and showed an extremely dovish attitude which disappointed the markets a great deal. Against the Swiss Franc (CHF), the current price of Yen has reached a 44 year low. This has a huge impact on the Japan’s population as Japan relies heavily on imports, making things more expensive for the Japanese.
A Paralysed Government
The interests of the US directly conflicts with the interests of the Japanese citizens. Abe Shinzo had pushed for the interest of Japan such as its re-militarisation, better ties with China etc and paid for it with his life. Kishida Fumio will probably be dead if the assailant threw an actual bomb instead of a smoke bomb, and we can be sure if he do not care about his people, he may not be so lucky the next time.
On one hand, external pressures from a superpower who had a firm chokehold on Japan. On the other hand, domestic unhappiness and frustrations are getting out of control. Without much room to breathe and to act on, it is unlikely that Japan’s situation will get better any time soon.
Ageing Population
It is no wonder that Japan has a population issue. Under such a negative, depressing and suppressed environment, there is simply no way that people would enjoy having babies. Imagine a young man whose wife was discriminated so much till she had to resign, and at work he had to take in all the nonsense from the elderly idiots who do not know what they are doing, stuck in an economy which never gets better where the citizens’ welfare and benefits keep on getting sacrificed. It is simply not a conducive environment to set up a family.
A young and big population is a big asset for any country. This is why China is powerful. This is why India also has hopes to become great once again. More people = greater market for economic negotiation and activity. More people = more productivity. The benefits of having a younger and bigger population are many, and I will not list them here one by one. That is why China is very concerned about their declining population now. Japan on the other hand, has declining birth rates. Its villages and towns are getting emptied out due to natural attrition and of young people moving out to the cities. A country with a declining population yet refuses to accept immigrants is not a country that inspires hope for its future.
A Population Which Has Given Up
In the past century Japan saw its glory first in World War 2 where it had conquered large areas of territory, putting themselves on a higher level than those they had conquered. It regained glory again in the 1980s before the start of their Lost Decade, where they had went around the world buying everything. It was said at that time that Japan could buy the US. But after the Lost Decade, which became the Lost 20 Years, which further became the Lost 30 years, the lost years showed nothing but the lost desires and lost motivations of the Japanese to become great again.
Japan is so heavily defeated and so tightly clamped down that they had lost all fighting spirit. Compared to their ancestors all the way up to WW2, where their way of the Bushido would make them choose ‘Death before Dishonour’, the Japanese now are willingly wagging their tails at their masters, with almost nobody willing to have a spine to stand up. As a country, they are defeated. As a people, they could not forget their glory before the Lost Decade, where money was earned easily and quickly in big amounts, and hence unable to accept the present yet unwilling and unable to do anything.
In half a century, Japan has gone from Death before Dishonour to what it is now. No pride, no honour, no ego, no dignity, no spine. Such a country has no hope.
Conclusion
Japan is a nice country. I love Japan for many things. Its culture, its anime, its music, its efficiency, its technology, its creativity etc. But as things are now, I will not invest in Japan. As mentioned earlier, I may trade very short term in the Japan financial markets. But long term investments are a no go. I would rather lose my money to inflation than to invest in them. With the assassination of Abe Shinzo, Japan has lost another person who wanted to make Japan great again.
