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James Dennin, Kapitall: Womenomics - making money and making babies - is the cure for the struggling Japanese economy. Wait. What?
Japanese Prime Minister Shinzo Abe – the source of 'Abenomics' – rang the closing bell of the New York Stock Exchange
yesterday. It was all part of a charm offensive to calm Western concerns about investing in a nation where a shrinking population, dwindling capital expenditure, and one of the greatest environmental catastrophes in human memory have stalled growth.
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Abe came to power with a pledge to turn Japan around, and return it to its glory days when the country emerged from post-war rubble to become a manufacturing powerhouse in a matter of decades.
Manufacturing has been stalled in Japan, in part because Japanese workers now seem to make too much. Abenomics, or the set of economic policies that the Prime Minister has championed as part of his platform, has three prongs: monetary easing, fiscal stimulus, and structural reforms aimed at growth.
In a prominent
Wall Street Journaleditorial yesterday, Abe revealed a fourth component of his plan: "Womenomics." His goal is to have more women in boardrooms by the Olympics in 2020 – saying that this will not only boost Japan's GDP – but also reverse the trend of declining fertility.
Abe's plans are laudable in many respects, but he faces some pretty big obstacles:
Japan is seen as an extremely conservative country.
Corporate executives are slow to invest.
Cultural norms can be hard to change.
Abe blames Japan's demographic problems not on women in the workforce –
as his opponents often do - but
on the lack of access to day-care and maternity leave. Similar measures are being proposed by another economic giant with a demographic problem – Germany, which also sees better day-care as as solution
to its rapidly aging population.
Solving the problem of a shrinking population is hard, but necessary. Investment in Japan has been stalled by a
rigorous regulatory climate and a shrinking market of workers and consumers. It certainly doesn't help that Japan is surrounded by rapidly expanding young economies in China, Thailand, and Indonesia, where labor is also incredibly cheap. While Japan's economy now leads the G7 (the world's
seven most advanced economies) in growth, Abe is still not succeeding at getting people to invest at home. This comes despite a proliferation of new Japanese factories across Asia.
Yet Abe insists emphatically that Japan is now a
"buy!" With due deference to Mr. Prime Minister – we decided to see what the analysts are saying. So we ran a screen on Japanese stocks that trade on the NYSE, looking for those with "strong buy ratings" as well as low
forward price equity ratios (Forward P/E) – a sign that a company's earnings may be expected to grow in the near future. .
We were left with five big name companies on our list.