2008年6月28日 星期六

Japan's Generation D

Japan's Generation D

June 24 (Bloomberg) -- Japanese growth is slowing, inflation is accelerating and record food and energy costs threaten to do increasing damage to Asia's biggest economy. What should investors do? Buy Japanese stocks.

That's the advice Russell Napier, a strategist with brokerage CLSA Ltd. in London, is giving these days. He says Japanese stocks are on the verge of a rally as the fastest inflation in a decade prompts institutions and individuals to dump low-yielding bonds and deposits in favor of equities.

Inflation, Napier said at a June 20 seminar in Tokyo, will trigger three things: a shift from bonds to equities; a consumer- spending boom; and improved profitability for manufacturers.

Napier's view is predicated on accelerating inflation spurring households to move some of their 1,500 trillion yen ($14 trillion) of assets into stocks to counter the erosion of wealth from higher prices. Consider this a notable flash of bullishness from the author of the 2005 book ``Anatomy of the Bear: Lessons From Wall Street's Four Great Bottoms.''

There's just one problem, and Japanese call it ``Generation D.'' Japan's Yomiuri newspaper last week headlined the phenomenon that economists have long been trying to grasp: ``Deflation Generation.''

It's a fascinating issue in the nation of 127 million as inflation begins to take hold after more than a decade of falling prices. Core consumer prices, which exclude fresh food, climbed 0.9 percent in April from a year earlier after rising 1.2 percent in March, the fastest pace since 1998.

Deflation Psychology

While Japan doesn't have an inflation problem, such increases may shock those who came of age professionally during the deflation years. Curiosity focuses on the 26 million Japanese the Yomiuri lists as being 39 years old or less, the demographic that might be most acclimated to a falling-price environment.

The question is whether a little inflation will be amplified in the minds of many consumers, thereby exacerbating its influence on the economy.

``It's worth noting how many Japanese aren't used to a world where inflation is rising,'' says Hiromichi Shirakawa, chief economist at Credit Suisse Group in Tokyo. ``It will make for a very interesting time as prices go higher and higher.''

Like Napier, investors are wondering if inflation will boost consumer spending. A ``buy now'' psychology could emerge as surging oil and food costs fuel inflation expectations.

Whatever happens, inflation's return to Asia's biggest economy makes for a shaky outlook.

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