Although the downgrade of Japan’s credit rating has surprised many. It shouldn’t come as a huge surprise. Japan’s economy has suffered a systemic malaise for a near 20 year period. True, it has seemed to bounce out of it at times, but it is stagnant, being dwarfed by the Chinese juggernaut. The earthquake solidified and exploited all of its weaknesses. Given all of Japan’s fundamental problems it has been no surprise that Moody’s has downgraded it.
Daiwa Slides
Daiwa Securities Group Inc, which is Japan’s second- largest brokerage in terms of market value saw its net loss grow from 9.43 billion yen from 1.19 billion yen in the first quarter of 2011. As the Nikkei continues to take a beating, financials like Daiwa Securities Group will continue to lose money. Despite Financials taking a beating over the last few months and technology companies like Seiko Epson Corp. following suit, Takeda Pharmaceutical Co. and others like it have followed suit with higher earnings.
Japanese Downgrade Revelation of Stagnancy
The real news with the Japanese downgrade is the implications on where things are going for other Western styled economies, most importantly America. Many analysts see a similar process unfolding in America, where the economy never fully recovers and produces less than satisfactory results over a period of many years. In that scenario, expectations are that there will be increased debt, stagnant growth, and chronic unemployment problems. Solutions for this scenario are not clear and investors should take necessary precautions.
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