The Nikkei was up yesterday and it now up close to 10% over the last 90 days. That makes no sense given that the Japanese quarterly Tankan survey showed business confidence at its lowest point since 1974. That year the Arabs cut oil supply and most of the free world went into a vicious recession.
All of the news in Japan has been bad. The only company that seems to be doing well there is Nintendo because everyone in the civilized world, and many who are not, want one of the company’s Wii video games.
Look at the rest of the Japanese corporate world from Sony (SNE) to Toyota (TM) and the mood is glum. At this point, it would be hard to point to any catalyst which would make things better.
But, Japan, which has been hit harder and earlier by the recession than many other large economies, has several things working for it. The value of those may not unfold for several more months, but, if they do, they may be a precursor for what happens in the US and EU.
Japan relies more on imported oil than any other large economy in the world. Goldman Sacha (GS) recently said crude could hit $30 a barrel in the first quarter of 2009. Japanese businesses and consumers could be paying oil and gas prices lower than they have been in years. That may jump start activity at some businesses and it could also begin to lift flagging car sales.
Like every other economy in the world, Japan cannot be well if the US is not. Analysts are beginning to show a tiny amount of hope that the US government will not only bail out the car industry, it will bail out the entire economy. If the new administration is willing to spend to create 2.5 million new jobs and will continue to underwrite a ruined financial system, the American recession may not last as long as many experts believe.
If Japan’s stock market is trading on what investors there are seeing six months out, and they are right, the global recovery begins at mid-year.
Douglas A. McIntyre