An index to a country is what an ECG is to a heart patient. The Nikkei clearly illustrates that Japan has been in cardiac arrest since a major heart attack in 1990 following years of dietary excess.Despite the fact that from a technical perspective it appears that all of the damage has been fully priced into Japan's economy, it is unlikely Japan will rebound dramatically anytime soon. Japan as an economy is still facing challenges greater than anywhere in the world. Their rapidly ageing population, lack of immigration, enormous debt to gdp ratio will hold their growth rate at a relatively low level for the forseeable future. Japan is a classic example of a perfect storm of problems that grind an economic system to a halt.
Putting things in perspective, Japan is simply in a really bad 20-year secular bear market that may be reaching its conclusion. It is important to realize that the run up prior to the decline that began in 1990 was faster and greater in intensity that the 1920s DOW or the 1990s NASDAQ. Growth was not modurated in Japan during this period. The chart went straight up. It only makes sense that the subsequent bear market would be deeper and longer as their economy consolidates.
I don't know enough about the fundamentals of Japan to make any predictions about a recovery. I do appreciate the fact, though, that the chart tells an interesting story.
