As of September 9th, the economic news out of Japan remains bleak, but you wouldn’t know it from looking at their stock market. Japanese GDP contracted at an annualized rate of -1.2% (April-June) versus an estimated rate of -1.0%. Capital spending (CAPEX) declined by 0.9% versus the original estimate of -0.1%. On the political front, Mr. Abe won a second term and he “wants to spread the felling of recovery to every nook and cranny on Japan”. From that, you can read “even more quantitative easing lies ahead”.
As against that news, China is aggressively stimulating to kickstart what is increasingly becoming a moribund economy. However, that news lifted the Japanese stock market up by some 7.7% on the day in the hopes that strength in China will spill over into Japan which has definitely been mauled by the weakness in China.
My ‘take’ on all of this is that the insolvency-induced slowdown of Japan is having its effects on the real economy but the flight to equities to escape the effects of its ‘mathematical bankruptcy’ (a solvency ratio of lower than .289 for the entire economy) continues unabated. The currency collapse and general economic malaise is all well and good to talk about while wringing your hands, but money has to go somewhere and the stock market (hard assets) remains the only place to go.