Investment in Japan: On the Rise?

J. Sean Curtin (Professor, Japanese Red Cross University)

This comment originally appeared in the "Japan-U.S. Discussion Fourm" (http://lists.nbr.org/japanforum) on May 18, 2002: posted here with the author's permission.

Recently, I have observed that quite a few international investment strategists have been recommending that investors put their money into Japan (see a typical article from the UK below). I have also noted that last week foreign investors were net buyers of Japanese stocks for the fourth week in a row. For example, during Golden Week nonresidents stacked up 74.26 billion yen in net purchases on the Tokyo, Osaka and Nagoya stock exchanges. This compared with 20.77 billion yen the previous week, which seems to indicate the trend is upward (see article at bottom). How should we to interpret this? Is it a sign of a coming economic recovery or unsound investment advice?

References:

Investment opportunities are in Japan, not US MoneywebUK,
Thursday 16 May 2002
http://www.moneyweb.co.uk
Extract: Share prices there have been on the rise since the start of the year. At the very least, the Japanese equity market has probably embarked on a 1999-style cyclical recovery.

Foreigners are net buyers for fourth week The Japan Times,
Saturday 18 May 2002
http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20020518b7.htm
Extract: There has been talk that foreign brokers and global equity strategists are recommending that investors increase their holdings of Japanese equities, saying improved profitability has not been factored into their prices.