American markets sank on Monday as recent reports from Japan
suggested that the country's economy is slowing down. The nation's
GDP rose at an annualized pace of just 1.4% in the three month
period ending in June, compared to an estimate
of 2.5% by economists
This sluggish figure implies that the country's post quake
recovery is increasingly fragile and could face some serious
trouble heading into the final part of the calendar year. It also
doesn't help that some of Japan's key export markets, such as
America and China, are seeing lackluster outlooks as well, meaning
that Japan could find it more difficult to grow in the future (See
Developed Asia Pacific ETF Investing 101
Yet, I have to admit I was somewhat surprised at the sharp
reaction by American markets to the Japanese slowdown, as the
nation is often overshadowed by its emerging peers in Asia and the
rest of the BRIC bloc. This trend makes me wonder, how relevant is
Japan in this day and age?
Yes, the country remains a global economic force and is
currently the third biggest economy (although it slips to fourth on
PPP terms behind India) in the world and a major exporter, but it
seems as if the country's best days are behind it.
After all, Japan has yet to recover from its property bust and
is now starting the third decade of its 'lost decade' with no end
in sight. This is especially true given the lack of population
growth in the country, one of the highest debt/GDP ratios in the
world, and pretty much nothing in terms of home grown commodities,
leaving the nation susceptible to foreign supply shocks (read
For Japan ETFs, Think Small Caps
What do you think? Is Japan still an economic force to be
Can the country come back to its former glory or is it doomed by
demographics to face a slow and inevitable decline as its mainland
rivals supplant it on the world stage?
Let us know in the comments below!
WISDMTR-JP SC D (DFJ): ETF Research Reports
ISHARS-JAPAN (EWJ): ETF Research Reports
MAXIS-NIK 225 (NKY): ETF Research Reports
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