Japan set to change after three decades of weak growth – Morgan Stanley

According to analysts at Morgan Stanley, Japan is set to finally undergo some rising economic growth after three decades of sluggish GDP increases.

Key highlights

As MS noted, macro productivity growth and micro corporate performance are expected to begin seeing increasing gains in the coming months, and while the average investor is quick to turn away from Japan, citing the country’s poor demographics spread, high public debt ratio and ongoing healthcare funding challenges, as well as a rock-bottom private sector capex, and sometimes non-existent   corporate RoE, MS suggests that these factors are rear-facing concerns and fail to take into account current and forward-looking indicators.

Analysts further point out that Japan has one the G7’s strongest growth rates for labour productivity and total factor productivity,  and while deflationary pressures may remain, deflation itself has disappeared, and private capex is actually rising for the first time since the end of the Bubble Economy era.

For the Yen, MS analysts are calling for a bullish JPY forecast on the back of rising opportunity costs on foreign assets, which could lead to a higher pace of repatriation flows, and should cause the Yen to reverse its long-running depreciation.