“Wednesday with Axel” … Japan? …. Is the US similar?

As we continue our Wednesday tour with Axel from our afore-mentioned Private Client Round Table event, this week we address, Japan.

Is Japan doomed?

According to Axel, in a word yes, and if they are not, they are going to have serious troubles reversing the slide of their currency and many of the policies they have set in motion. According to Axel, Japan is setting up for the great devaluation of currency in order to compete internationally via trading (lower currency makes you more competitive in the short run) but over the longer term, demographics (aging country) and personal characteristics (huge savers) will be a very formidable headwind for the foreseeable future.

Is the US Similar to Japan?

Again according to Axel, yes and no. Many of the policies set in motion over the last decade and magnified over the latest great recession (07-09) have the potential to drive the US to a similar place, however we are not there yet.  Most notable the US currency is the world reserve currency and this will not change for many decades. (As a side comment, Axel felt strongly on this point and made note that as China grows they will become more viable, but due to their current restrictive system they will not garner international currency  confidence.)

Many policies, such as low-interest rates, high borrowings are putting downward pressure on the US dollar, a large similarity to Japan. Of course the US consumer has no similarity to Japan in that our national savings rate is low and US are spenders, for the good or the bad.

Lastly, on a question from the field if Japan could cause a global disconnect or collapse, while anything is possible according to Axel, his thoughts were not that dramatically negative, differing from many of the doom and gloom crowd today.

Have a great day!

John Kvale