GMO's Ed Chancellor submits:
The purpose of this essay is to address certain common perceptions, or rather misperceptions, about Japan that prevailed before the latest crisis. In particular, I wish to examine the dreaded Ds which have afflicted Japan in recent years: demographics, deficits, deflation and (corporate) decline – to which must now be added (natural) disaster. Do investors in Japanese stocks face yet another lost decade?...There’s little doubt that Japan’s economy is capable of growing again and that returns on investment are capable of improving. All that’s needed is the will. As a nation, Japan has often moved at a painfully slow pace. But few peoples have demonstrated such a capacity for rapid change once they have decided upon it. The Japanese modernized at a blinding pace after the Meiji Restoration of 1866. The same spirit was on display during the reconstruction miracle after the Second World War. It had become fashionable to decry the unadventurous younger generation as stay-at-home “herbivores.” Yet the world’s admiration for the Japanese people has been rekindled by their stoic response to the most recent national catastrophe. If this spirit and sense of unity were directed toward Japan’s economic revival, a third lost decade would surely be averted.
Full white paper: