By: Dr. Mike Campbell
The Nikkei 225 index managed to end its final trading session of the year with a modest 0.7% rise, closing at 8455.35. Japan has endured one of its most tragic years in living memory following the devastating earthquake and tsunami which struck the nation in March. The natural disaster left more than 20000 people dead or missing, obliterated coastal towns and shredded the infrastructure in large regions of the country.
Prior to the earthquake, the Nikkei stood just below 10700 points, but with occasional blips, it has steadily declined ever since. As a mark of just how bad things have been for the Japanese stock exchange this year, the end of year close is at a level not seen since 1982 – with that said, it is still 10% above the level seen at the worst point of the global financial crisis.
Then and Now
Before the global financial crisis struck, the index stood at the 18000 point mark, but even this is a mere shadow of the performance back in the late 1980s when the index hovered around the 38000 point level. The crash in the Japanese stock market was brought about by the bursting of a property bubble which propelled the nation into the economic doldrums for twenty years.
Every cloud has a silver lining, so companies involved in construction have seen their values improve as the nation sets about the daunting task of clearing-up and reconstructing areas devastated by the tsunami. For instance, house builder SXL has seen the value of its shares appreciate by 260% this year.
Japan is suffering from a high Yen, a public debt which stands at twice its GDP, relatively high unemployment (in Japanese terms), deflation and an aging population – and you thought we had problems!