It is well-documented that Japan’s population has started aging for some time and has even started declining in recent years. Such circumstances make it difficult to expect strong economic growth for the country in the foreseeable future. Can the stock market thrive when the domestic economy is facing such a dire outlook? We argue yes. For one, the Japan economy is still the world’s third-largest economy after the US and China, and not too long ago, was the second largest economy before being overtaken by China. As such, for many years, Japanese companies had a large home base to build their business and then expand into overseas markets. This has allowed Japan to create many world class companies in the past few decades, many of whom are household names globally, like Toyota, Sony and Kao, and many more which provide nonconsumer products but which are equally important in their own fields. We believe the situation remains the same today. To keep the story short, the Japan stock market does not represent just the Japan economy but is also a gateway to the global economy.
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