Japan’s Historic Moment Creates Historic Confusion

by Ryan Cole, Investment U Research Team

The dust is settling in Japan, and the only thing we know for sure is that no one can agree… on anything.

With the new government in office – the first real time Japan has been ruled by any group other than the Liberal Democratic Party (LDP) since the country became a democracy – there’s plenty of mystery and not much clarity, though everybody seems to have an opinion.

One commentator says government stimulus is about to go wild: Buy Japanese everything, she preaches, especially banks. But another disagrees: The too-cozy relationship between Japan’s government and contractors is now over, he maintains, so short Japanese construction. A third claims not much will change: Japan is a conservative ship that turns slowly, if at all. Yet still another says we’ve never really known Japanese ...

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I am rushing but would be remiss, of course, if I did not mention Sunday's landslide victory of the DPJ in Japan which marks an end to a +50 year reign of the conservatives.

from the BBC;

The DPJ has won 300 seats in the 480-seat lower house, ending 50 years of almost unbroken rule by the Liberal Democratic Party (LDP), NHK TV says. DPJ leader Yukio Hatoyama hailed the win as a revolution and said people were "fed up" with the governing party.

Prime Minister Taro Aso has said he will resign as head of the LDP, taking responsibility for the defeat. Japan is suffering record unemployment and its economy is struggling to emerge from a bruising recession.The DPJ has said it will shift the focus of government from supporting corporations to helping consumers and workers.

and here is the Economist;

IN A land of volcanoes and earthquakes

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I have been much more positive about the Japanese economy than most other analysts in recent months, largely because I believed that many of the problems from the Japanese recession of 1990-2003 were finally in the country’s rearview mirror. In particular, I believed that the Japanese budget deficit – which, by 2003, had become quite acute – was well on the way to being solved through public spending restraint. That, in turn, would allow Japan to pay down its excessive public debt, giving its private sector room to expand. But the surprise resignation of Japanese Prime Minister Yasuo Fukuda on Monday suggests I may have been wrong about the country’s near-term prospects. Japan Gives Investors a Bubble Bath The Japanese stock market and real estate bubble of the 1980s is now the stuff of stock-market legend, for it sent that country into ...

Japanese Prime Minister Yasuo Fukuda will spend about $108 billion (11.7 trillion yen) on a stimulus package that critics say is more of an attempt to salvage political support than it is a serious effort to rescue an economy teetering on the brink of recession. While the plan is being spun as a life preserver for Japanese consumers and businesses struggling with high food and energy costs, it includes just $18 billion (2 trillion yen) in new spending. Most of the package will be allocated to loan guarantees for small and medium-sized businesses and will not necessarily translate into bottom line growth. "The program earmarks 2 trillion yen in real spending, but probably barely half of it will contribute to boost [gross domestic product (GDP)]," Kyohei Morita, chief economist at Barclays Capital (ADR: BCS) in Tokyo, told Bloomberg News. "The ...