No analysis of the global credit crisis and its aftermath can be complete without some reference to Japan. Some folks say the U.S. economy is headed for a Japan-style "Lost Decade". Others point to Japanese stocks and their failure to come anywhere close to their late 1980s bubble era highs as a stern warning that the U.S. market may never recover its previous highs. Both are wrong.
It's safe to ignore these theories or any others that hinge on comparisons to Japan. Why? Because Japan is different. Why is it different? Because it is. If you've lived there, you know exactly what I mean. If you haven't, ask someone who has.
If this sounds confusing or Zen-like, so be it. Although Borderless Investor was founded on the belief that the world is increasingly global and that investors need to spend more time exploring international investing, Japan still belongs in its own separate bucket for analytical purposes.
[Related -Netflix, Inc. (NASDAQ:NFLX) Q1 Earnings Preview: Trending Towards a Double Surprise]
When you make comparisons to Japan, it's never really apples-to-apples. It might not even be apples-to-oranges. In a lot of cases, it's more like comparing apples to, say, antique furniture.
Part of the reason is that you need to unpack the economic rationale of why something is happening in Japan and separate it from all the other political and social stuff that drives decision-making. This is not easy to do. And the "soft" political/social part of the analysis can be WAY more important than the "hard" numbers.
My former colleague Willie Pesek at Bloomberg Tokyo uses a great baseball metaphor in his latest column to drive home how Japan just does things very differently than the rest of the world.
[Related -SolarCity Corp (SCTY): Baird Says Buy the Dip]
It's a microcosm of the difficulty Japan is having revamping its recession-prone economy. It shrank at a record 15.2 percent annual pace last quarter as exports collapsed and consumers and businesses cut spending.
The global recession gets most of the blame. The forces of old Japan, both in the government and private sectors, also explain why the economy isn't holding up better.
Banks, for example, avoided the toxic debt that infected peers in the U.S. and Europe. That didn't stop them from loading up on stocks via cross-shareholdings in friendly companies. The prevalence of takeover defenses and poison pills also is limiting foreign investment at a time when Japan needs it.
Japanese baseball can seem overly formulaic and rule-bound to foreigners. Then again, so can Japanese business. It's often more about bunting than swinging away.