Teri - The Japanese government is "investing" in their stock market, to help get Book Values up before the end of their FY. Sounds like a screwed up mess to me, and a propping up of a market (not exactly free enterprise, last I checked).
Although I don't know about the government being so blatant as to actually invest in the market themselves, I do agree that their stock market is more 'controlled' then ours. But, it doesn't change my main point. It is very hard to predict when it will crash. At some point they must fix the underlying problems or they are guaranteed a huge crash. As any engineer will tell you, non-linear events are normally impossible to predict precisely. Hence the surprise of the SEA mess. People knew they had a problem, but they didn't know what kind of trigger would be necessary to set it off, and they didn't know when it might happen. The same is true with China and Japan. I personally would be surprised if Japan doesn't crash in the next 5 years, but I would have said the same 5 years ago.
Clark
PS Just for kicks, a list of possible triggers in Japan:
1) Enough banks fail to cause enough write-off's of loans and stock of that bank to cause more banks to fail, ... . This is what is known by nuclear physicists as a 'self sustaining reaction'. Japan has avoided this so far by having lax standards for accounting, but at some point a threshold will be reached.
2) Some of the more solvent banks or companies decide to disentangle themselves from the web of cross stock ownership so that they are protected from the future movement of the stock market. This causes downward pressure on the market, which causes more companies to liquidate their cross ownership. So far this has not happened because Japan has more of a consensus culture. But, ... . (Note a similar scenario applies to individuals.)
3) Several banks fail and this combines with the fact that accounting transparency is negligible. The result is that people start a run on banks at the merest whisper of bad news. This, of course, is a self-fulfilling prophesy. This has been avoided so far by depositor guarantees, but even with depositor guarantees there is a delay in getting your money back. If you need the money now (because of perceived inflation or job uncertainty) then you will be much more likely to remove your money at the whisper.
4) Some combination of all of the above. One of these will probably start the avalanche, but then they will all kick in. Positive feedback does the rest - crash! |
