You may have heard about the recovering economies of the United States and Europe, each expanding at a roughly 2% rate of economic growth.
But chances are you have not heard much about the world’s third-largest economy, Japan. As it turns out, Japanese economy is jumping.
Just yesterday, the government announced that Japanese gross domestic product (GDP) grew at a 4% annual rate in second-quarter 2017 to smash all expectations. It also extended the Japanese economy’s longest streak of uninterrupted expansion to six quarters. That’s the longest in 11 years.
Japan’s labor market is tight. Business confidence is high. Investments connected with the Tokyo 2020 Olympics are boosting growth. On a panel on global investing I chaired at my Eagle Financial Publication’s colleague Mark Skousen’s FreedomFest event last month in Las Vegas, Asian investment expert Keith Fitz-Gerald pointed out that he detected more energy and activity in the Japanese economy than he had in decades. He should know. He lives there.
It is no surprise that the Japanese stock market is rallying. The large cap Nikkei 225 Index is well on its way to six consecutive years of positive returns — a feat it last achieved during the bubble years of the 1980s. Japanese small-cap stocks are leaving their large-cap counterparts in the dust, having soared over 24.04% over the past 12 months. Despite their impressive recent performance, I believe the Japanese small-cap stocks could still double over the next two years.
The Japanese Bubble Revisited
Say the word Japan to a global investor, and you think “stagnation,” “malaise” and the “financial bubble popping.”
It wasn’t always so.
Thirty years ago, Japan was the “China” of its day. In his novel, “The Rising Sun,” author Michael Crichton lamented that Americans had to accept the inevitability of a country the size of Montana dominating the United States economically.