It’s scary, 30 years lost… Japan’s analysis of Japanese industry by Chung Young-hyo

The Tokyo stock market recovered its 30,000 line in 30 years, but the gap with global markets such as the United States has widened further. It is because of the serious suffering of the’lost 30 years’ of the economy stagnating after the collapse of the bubble economy in 1990.

On the previous day (15th), the Nikkei 225 index ended at 30,084.15, up 2% from the previous trading day. It has exceeded the 30,000 line in 30 years and 6 months since August 2, 1990.

On the 16th, the Nippon Geizai Shimbun analyzed that the Japanese stock market has managed to recover to its pre-bubble level, but its position in the global market has fallen. When it reached a record high of 38,915 at the end of December 1989, the momentum to overtake the United States as the world’s second largest economic power disappeared. At that time, Japan was full of confidence that it was the first in the world to overcome’Black Monday’, when the New York Stock Market crashed 22.6% on October 19, two months ago.

In 1990, the market capitalization of the Tokyo Stock Market was $2.9 trillion (about KRW 3197 trillion), accounting for 31.2% of the global stock market capitalization. There was little difference from the US at $3.1 trillion (33.0%). Over the past 30 years, the market cap of the Tokyo stock market has increased to $7.4 trillion, but its share in the global market has shrunk to 6.8%.

In the meantime, the market cap of the US stock market has grown to $4.55 trillion, and its share in the global market has increased to 42.0%. The market cap of the five major U.S. information technology (IT) companies, represented by Google, Amazon, Facebook, and Apple (GAFA), exceeded the entire first part of the Tokyo Stock Exchange.

As for the number of the world’s top 1000 companies, by 1990, Japan had 341 companies, more than 274 companies in the United States, but the situation has changed to 77 companies and 417 companies. The change in the status of the two countries can be confirmed as the nominal gross domestic product (GDP), which used to be ‘3.100 billion dollars vs. 6 trillion dollars’ in 1990, changed to ‘5.1 trillion dollars vs. 21.900 billion dollars’ last year.

The difference in the quality of the stock market also increased. As a result of active business reorganizations such as mergers and acquisitions (M&As), the number of listed companies in the US stock market decreased from more than 8,000 in 1996 to about 4,000. The average market capitalization per listed company increased six times from $ 790 million in 1990 to $ 4.82 billion.

On the other hand, the number of listed companies in the first section of the Tokyo Stock Exchange is currently about 2,200, up 80%. During the same period, the average market capitalization per listed company was $ 1.86 billion, an increase of only 16%.

With the emergence of emerging IT conglomerates and the rise of corporate metabolism, the average age of U.S.-listed companies (the number of years of business from start-up to present) has grown younger from 66 to 44 in 30 years, while Japan is the largest among major countries, from 56 to 88. many.

The fruit of the stock price exceeding the 30,000 line does not have a large share of Japanese companies and Japanese individual investors. This is because foreign investors filled the vacancy while Japanese companies, financial companies, and individuals were selling stocks after the collapse of the bubble economy.

Japanese individual investors have net sold Japanese stocks worth 68 trillion yen (about 712 trillion won) over the past 30 years. As a result, the proportion of individual investors’ holdings fell from 20.4% to 16.5%. The share of Japanese financial companies holdings from 40% fell to the 20% level. On the other hand, the share of foreigners’ holdings rose nearly 7 times from 4.7% to 30.3%.

Market experts are concerned that the stock market has soared beyond the recovery rate of the real economy. It is said that the excess liquidity caused by large-scale financial easing in major countries flows into the stock market, showing an overheating pattern.

According to UBS, 33 major countries spent 4.8% of their GDP last year as economic countermeasures for the novel coronavirus infection (Corona 19). In 2009, right after the global financial crisis, it was 1.6%. Japan’s fiscal expenditure is 40% of GDP, the largest along with Germany.

Masashi Akutsu, chief equity strategist at SMBC Nikko Securities, analyzed, “Unlike the past economic crisis, the deterioration of corporate performance due to Corona 19 is limited, but the stock price has soared due to excessive financial easing.”

Because of this, most experts predicted that this year’s Nikkei 225 will move from the mid-to-late 20,000 range to around 32,000. On the other hand, Nissei Asset Management predicted that the stock price could reach the 38,000 line this summer.

Tokyo = correspondent Jeong Young-hyo [email protected]