Money For the Rest of Us

Lessons from Japan's 34 Years of Stock Market Underperformance

Feb 28, 2024

Exploring Japan's 34 years of stagnant stock market performance, the podcast delves into the causes behind the underperformance, including the stock bubble and demographic challenges. Insights on Japan's unique housing market trends, economic growth strategies, and lessons for investors. Reflections on Japan's work culture, aging population, and the significance of understanding market dynamics for long-term investment success.

52:40

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Quick takeaways

High valuations in Japan led to the 1989 bubble, resulting in a 3.1% annualized drag on stock market performance.

US earnings growth outpaces Japan with 6.2% annualized versus Japan's 3.1% on earnings per share basis.

Japan's shrinking working-age population poses economic growth challenges, requiring solutions like increasing female labor force participation and immigration.

Deep dives

Lessons from Japan's 34-Year Stock Bear Market

Japan's Nikkei 225 index broke peak after 34 years, returning essentially zero in price. Comparing to US, Japan's stock market returns 1.1%, while US returns 9.6% annualized over the 34 years. High valuations in Japan led to the 1989 bubble, resulting in a 3.1% annualized drag. Japan's stock market is improving but faces challenges like demographics, productivity, and changing cultural norms.

Introduction

3min

Analyzing Japan's Stock Market Underperformance Compared to the US

3min

Discussing Japan's Economic Challenges and Lessons from its Market Performance

3min

Reflections on Japan's Economic Growth and Work Culture

7min

Investing in Japan: Challenges and Opportunities

20min

Japan's Aging Population and Housing Market Trends

7min

Japanese Housing: Balancing Air Flow and Heating

9min

Lessons Learned from Japan's 34 Years of Stock Market Performance

4min

Japan's stock market recently exceeded the all-time high first set in December 1989. That's 34 years of zero price appreciation for the stock market. What drove this lackluster performance, will it continue, and what can we learn from it?

Topics covered include:

How big was Japan's stock bubble, and how much did it contribute to the stock market's underperformance over the past three decades
How do Japan's demographic trends impact its economic challenges, and what are the solutions
Why Japan's houses are built to depreciate in value
What lessons can we learn from Japan's extended bear market

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Show Notes

Japan’s Nikkei 225 index eclipses record high after 34 years by Leo Lewis—The Financial Times

Investors eye further gains after Nikkei breaks through 1989 high by Leo Lewis and Kana Inagaki—The Financial Times

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