- "As is by now well known, Japan is on the verge of losing its number two status in the ranking of the world’s largest economies. For the past decade, Japan has struggled to keep up with the pace of growth in other major developed economies, the BRICs and other emerging economies. China has increased its size to seven times that of Japan, and even some of the Euro economies have increased in size more than Japan in US$ terms (both exaggerated by the weakness of the Dollar). Unsurprisingly, therefore, financial market participants now tend to think about Japan and its markets against this backdrop."
- "However, recent developments paint a less gloomy picture. First, the cyclical recovery of the economy is on a par with that in the US and Europe—and possibly even better. Second, following another change in the Prime Minister, the conditions for Japan to make progress on its taxation system and its fiscal challenges now appear to be in place. Moreover, Japan is in the same continent as most of the key exciting economies of the next decade and beyond. Hence, Japan’s experience and historical success as an exporter should allow it to benefit from the continued emergence of China and India, and, within the context of the N-11 economies, Indonesia and perhaps some of the other Asian economies too."
- "We currently forecast that JGBs will underperform other major markets by the end of the year. We also expect a weaker Yen and a stronger performance of Japanese stocks (although we expect other global markets to outperform). It will be interesting to see how the outlook for Japan pans out in coming weeks and months. But it may be that Japan will not be as uninteresting’ as many overseas investors typically think.
GoldmanSachs Global Economics Weekly 20100623
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