Abenomics

Um, and it took them decades to recover from it.

Japan never really recovered from the balance sheet recession until Abenomics started kickstarting.

Also, the wealth effect is similar.

You know, uh, you know, let's weaken the yen and get assets up and, and so on and so forth.

The large majority victory from the LDP with the super majority allows for much more room for the current government to act, and I think this is a very positive for the Japanese market as a whole.

Most investors still are looking at the lens of Japan through the Abenomics lens, which is accommodative monetary policy, fiscal supports, and gradual reforms.

That framework is well understood and largely priced in, I think.

But where I see the potential upside for the Japanese market and the main source of surprise is that could Sanae Takaichi lead the country towards a more reform-driven agenda, an approach that would be more inspired by structural reforms, deregulation in investment, which would be most like something we've seen recently in Germany, for example, in Europe.

He's always been a Japan expert.

Actually, the reason I know Scott Bessent is that I was head of research in the Mora Securities, which is the biggest Japanese broker, right? And we always talked about Japan, uh, together, uh, when Abenomics just started.

You, you were ranked, you were ranked the number one currency strategist by institutional investor for five consecutive years.

Oh yeah? What's the yen gonna do t-t-to tomorrow, smarty pants?

When were those, when were those years? Was that 2010 era?

Yeah, I joined Nomura in, uh, 2009, and those were the years.

Yeah, so there was that, when the Euro crisis happened and, and Abenomics started-

And you think what we're about to see might be even more interesting than that?

Growth solves a lot of problems, but growth comes from free enterprise and market competition, not from a statist government.

Look, if I look back, Japan implemented Abenomics in 2012, 2013, and one of the most important aspects of that was the deregulatory aspect, was the corporate sector getting more efficient and the private sector jobs.

And as I've said over the past few days, I think Abenomics was a restructuring the economy, a reflationary program, and now I think Japan can sit back and enjoy the benefits to that it's

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And I thought, hold on, that doesn't gel with everything I've been told.

So I went down the rabbit hole of the history of activism in Japan, the legal framework that underpins the corporate governance environment in Japan, and then into the reforms that were being brought in with Abenomics, so the stewardship code and governance code that we discussed earlier, for example.

And I looked at that and I thought, wow, this is an incredible opportunity.

I was very familiar with the history of shareholder activism in the US and Australia, uh, and New Zealand, um, with the corporate raiders, that sort of thing, from the '80s.

But, but a lot of what has driven the market, uh, over the past 10 years, and it's been a, it's been a slow burner, um, but it, but it is, but it's now fizzing away, uh, has been the structural change that was brought about by Prime Minister Abe beginning in 2015.

So, and it became known as Abenomics.

And this was, this was his realization that, that Japan internationally would struggle unless it could attract int- big international capital.

It's a very, very conservative society.

We all agree, but what are you going to do about it? Is there going to be some sort of impetus from the government to force this to happen? The last time there was a major change in the asset allocation of GPIF, and then downstream everyone else follows, that's individuals as businesses, was in 2012.

Prime Minister Abe came out and said, this is Abenomics, which is just printing money, and we want the GPIF to change their asset allocation to favor foreign securities more than domestic.

Right.

And it took him two years to get the formal agreement from the GPF ministers.