Alarm bells sounded this week when Japan's finance minister, Kiichi Miyazawa, declared the nation's p...
Despite this alarmingly frank appraisal of the nation's fiscal health, onlookers are urging for calm and say there is no reason to pull out investments.
Miyazawa's comments encouraged Japan's currency to slump to a 19-month low as it worsened to more than 120 yen to the dollar.
Furthermore, Japan is seen to have few policy options available, as interest rates are already very low and the government already has a large deficit, so little economic stimulus can be expected from low interest rates or tax cuts.
Yet Denis Clough, manager of the Schroder Japan Growth Fund investment trust said: "We're not looking at a doomsday scenario. We wouldn't suggest IFAs pull money out. It's true that the government's public finances are in pretty poor shape but you've got to look at the health of the private sector as well as the public sector to get an overall view of economic prospects." He added: "There are very few optimists to be found regarding Japanese growth for this year or the yen. That normally means the downside may not be that great. If everyone's gloomy already, that's probably a good sign for the market." Clough readily admits he's not that positive about investing in the Japanese economy in the short-term, and finds it difficult to speculate where short-term good news might come from, however, he does argue that at least most of the Japan's bad news is in the public domain.
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