Glossary J

The financial world is full of jargon - i.e. strange words no-one understands. Here we try to explain some of the many technical terms.

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J

Japan

Japan is often referred to in economic terms as a 'basket-case'. This is because after reaching an all-time high of around 40000 their benchmark Nikkei index crashed to around the 10000 mark and has stayed there since. Not only has it stayed there but it has remained unmoved by each and every measure introduced by subsequent governments to kick-start the market again.

So what? - you might say - the Japanese are useless and don't have a clue what they are doing, their politicians and financial institutions are corrupt, they do not understand the market system, etc etc ... and you might be quite right. These criticisms would certainly be taken as true if Japan were some banana republic or Eastern European dungheap - but its not, its Japan. The worrying thing for those interested in long term market dynamics is that, in a nutshell, the Japanese have proved themselves to be conspicuously good at whatever field of endeavour they apply themselves to; starting out as a defeated nation after WW2, coming from a long way back, they adapted their feudal instincts to market capitalism, corporations replaced the warlords and business replaced warfare. Everyone knows the story from then on - they quickly became world leaders in electronics, high volume cars, motorbikes, shipbuilding and engineering; in the 1970s and 80s, Western managers would travel to Japan to learn the secrets of their economic miracle ... but now we tell ourselves Japan is a 'basket case'! How can the Japanese be so good at what they do and yet be in such overall dire straits?

Most Western market watchers are aware of the historical cycles of bull and bear markets, studying the economic data for some insight into their frequency and duration - they all hold the implicit assumption that there is an actual cycle there. When we look at the markets while holding this assumption we believe that it will go up, go down for a little while, and then start going up again - there is always an upturn somewhere round the corner. Most long term financial planning is based on this idea. But here is a scary thought for you all - the Japanese markets are not in the doldrums because of their incompetence, but rather the reverse; the Japanese exceeded us, overtook us and reached the final natural end-point for all markets, before we have - the Japanese scenario is therefore the one which we all have to look forward to.

You should realise that the future economic and hence social consequences of this are rather worrying.

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