The situation in Japan has become even more critical since the events of 11th September. ...
The situation in Japan has become even more critical since the events of 11th September.
This is the opinion of Nick Reid, senior investment manager in Japan for Gartmore. Reid believes Japan's economy is deteriorating, recession is firmly in the picture, earnings are visibly collapsing and hopes of reform, from Prime Minister Koizumi's government, are rapidly fading.
Despite the gloomy picture, Reid isn't despondent, he commented: "A lot of this is already priced into the market. The situation is so bad that Japan no longer has the option of muddling along as it has throughout the 1990s."
Reid argues that something has to be done in terms of government policy and would like to see a more proactive stance taken in dealing with the country's banking system problems. Reid suggests an injection of capital from the taxpayer should happen along with a more stimulative response from the Bank of Japan such as inflation targeting.
Managing the Japan Focus Fund, Reid is concentrating on the few areas of the market still seeing growth favouring companies including Canon, Toyota and international equipment leasing and financing giant Orix.
The fund's exposure to cyclical areas has also been selectively increased, to which Reid explained: "We like both textiles and paper since they have better industry fundamentals than other cyclical areas because they have less excess capacity. The equity market is undoubtedly vulnerable at the moment, but we believe the areas that we have focussed on have the strongest growth prospects and represent excellent investment opportunities."
Despite improved risk appetite
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