Regular readers will know that we have been very bullish of Japan throughout 2012, adding to our position in November of last year around the 8800 level on the Nikkei and taking profits recently. The following story caught my eye re the renewed euphoria surrounding Japanese equities and perhaps vindicating our cautious stance after such a strong rally…
Atsushi Moriyama, owner of a bookstore in Tokyo’s financial district, gauges the stock market by sales of the Kaisha Shikiho. The so-called bible of Japanese equities has been flying off the shelves since December.
“One look at the sales figures and you knew this rally was going to keep going,” said the 42-year-old at Yuhodo, his shop in the capital’s Kabuto neighborhood.
The Shikiho’s publisher, Tokyo-based Toyo Keizai Inc., said it’s run out of the latest edition. That may be a sign of renewed interest among individual investors, a generation of whom grew up believing stocks only go down, Bloomberg Businessweek reports in its Feb. 18 issue. The Nikkei 225 Stock Average last week closed at its highest since September 2008 after a 12-week advance that was the longest such streak since 1959.
Sales of the Shikiho, a quarterly guide that packs facts and figures on Japan’s more than 3,500 listed companies into a tome about as thick as the Gideon Bible, are just one indicator of the seachange. Nomura Holdings Inc., Japan’s biggest brokerage, said 50,000 people applied for its stock seminars in December, up 75 percent from a year earlier.
Noriko Hachiuma, an office clerk in her 60s, says she may be ready to test the waters again after losing about 2 million yen ($21,500) a decade ago.
“I don’t know much about stocks, but this rally got my attention,” she said in front of the rack of investment magazines she was browsing at Yuhodo.
The Nikkei 225 rose 0.5 percent to close at 11,307.28 today. The gauge climbed 30 percent since Nov. 14 as the yen slid after Shinzo Abe, first as a candidate and then as prime minister, pledged to beat deflation and pushed the Bank of Japan to ease monetary policy. The benchmark is still about 70 percent below its 1989 peak.
Japan’s households have 1.5 quadrillion yen in wealth, an amount about equivalent to the $16 trillion U.S. national debt, and their reluctance to return to the market may be one reason shares haven’t rebounded sooner. Stocks accounted for 5.8 percent of people’s assets in September before the rally, according to Bank of Japan data. That compared with 32.9 percent in the U.S. and 14.3 percent in Europe.
Moriyama says that may be changing. The bookseller is down to his last 30 copies of the 400 Shikiho he ordered for the current quarter and expects to sell out soon. He had to return more than 100 of the previous edition. The publisher wouldn’t disclose sales figures for the guide, which is called the Japan Company Handbook in English.
In another sign of renewed interest: Matsui Securities Co., the largest brokerage that provides data, reached a record 129,765 active accounts last month, adding 15,351 compared with 542 in October before the rally. Monex Securities and Kabu.com said accounts in use rose to all-time highs in December.
The turnaround in Japanese stocks may have less to do with Abe’s policies than with the strength of the country’s companies, which have shut unneeded factories and learned to cope with years of a strong yen, says Jesper Koll, Tokyo-based head of equity research at JPMorgan Chase & Co.
“The number one reason why we are on the verge of a major turning point is corporate Japan is healthy,” Koll said.
Toyota Motor Corp. is a case in point. The nation’s biggest company last week raised its operating-profit forecast to 1.15 trillion yen, the most in five years. The projection was based on the assumption the yen would trade at 81 per dollar, about 15 percent stronger than yesterday’s rate of 93.34. The automaker says its operating profit rises 35 billion yen for every 1 yen the currency weakens against the dollar.
While anecdotes about day-trading office workers may bring to mind the old saying that “it’s time to get out of the market when even shoeshine boys are giving stock tips,” Moriyama said frenzy comes in many shades.
“In 2005, couples used to come in together to buy books on stocks,” he said. “There was a buzz in the store that was totally different from normal. When it gets like that you know stocks have hit a peak. We’re not quite there.”