Seize the "last opportunity"! Japan invites global asset management giants to "invest"

Aso Fumio is trying to seize the "last opportunity" to revitalize Japan.

On Friday, October 6th, Japanese Prime Minister Aso Fumio called on investment giants such as BlackRock to invest in "Japan's future" at a roundtable meeting. Aso Fumio stated:

"After decades of deflation and economic stagnation, the Japanese economy and wages are growing again, and Japanese stock prices are approaching their highest level in 33 years."

Larry Fink, CEO of BlackRock, sees shades of Japan's "economic miracle" of the 1980s in the country's current economic transformation. Fink said:

"Japan is undergoing a series of extraordinary economic transformations. It is similar to the miracle of the 1980s. I expect this miracle to last longer."

Aso Fumio told the participants that Japan will continue to implement the "New Capitalism Execution Plan" without hesitation, paving the way for the "New Japan". He hopes that Japan's 210 trillion yen in household savings can be used more for investment, thereby increasing corporate value and bringing benefits to residents in a virtuous cycle:

"We hope that you will make new investments in Japan's future. People at home and abroad have already felt Japan's determination to transform into an international financial center."

Drew Edwards, a senior portfolio manager at Usonian Stock Fund under GMO, said positive things are happening in the Japanese market:

"As time goes on, we will continue to see these constructive policies take effect."

However, senior Japanese investors warn that "the window for maintaining global interest in Japan is limited" for the Japanese government. Japan is currently benefiting from external factors such as global inflation (which helps Japan escape deflation) and the large interest rate differential between Japan and the United States.

As the interest rate hike cycle in the US and Europe approaches its end, this means that if the interest rate differential between Japan and the United States narrows, the yen may strengthen from next year, which may not be so profitable for foreign investors entering Japan.

The CEO of a large Japanese company stated that currently, Japan appears to be a "sweet spot" for investment, partly because many companies are undergoing changes. But people need to be sure that this is long-term:

"Investors here this week are not here to trade Japan, they are looking to see if these positive factors they see now will still exist in three, five, or even ten years."

Some senior government officials believe that the current opportunity may be Japan's last chance to attract massive investment inflows as global funds are being reallocated. If they fail to attract enough external funds, they may miss the opportunity for economic growth and market prosperity.

Aso Fumio's Ambition

Under the leadership of Aso Fumio, the Japanese government announced a draft revision of its economic development strategy this year, known as the "New Capitalism Execution Plan," aimed at improving the labor market and promoting economic growth. Some analysts point out that Aso's frequent mention of "new capitalism" and related economic issues since taking office is a testament to his emphasis on revitalizing the Japanese economy. From an economic perspective, "new capitalism" not only needs to address the real difficulties of continuously increasing labor costs and production costs leading to a continuous decline in competitive advantage, but also needs to solve several problems such as ensuring stable supply of important materials, preventing "illegal outflow" of important technologies, and building a resilient and strong supply chain system.

On the other hand, from a social perspective, "new capitalism" must respond to the challenges brought by the widening wealth gap and various global issues such as climate change, and solve the "chronic diseases" that have long plagued Japan's social development while revitalizing the economy.

Kishida said, "Our economy has the opportunity to enter a new golden age for the first time in 30 years. We must not miss this opportunity."

However, with the continuous deterioration of Japan's population structure and the ongoing pressure from foreign geopolitics, the requirements for the Japanese government's capabilities are changing with the times. According to analysts at Daiwa, Japan lacks some necessary capabilities to achieve this goal and needs to make efforts in the following four aspects: (1) Accelerate the dissemination of new technologies; (2) Make the labor market more flexible; (3) Further improve the governance of companies and the public sector; (4) Increase Japan's fiscal efficiency by ensuring that basic income exceeds net interest expenses.