The Independent looks at investing in Japan, and the risks involved given the Nikkei’s rocky history since 1989. Included are fund recommendations for those interested in Japanese investment.

Here’s some good material focusing mainly on the challenges and characteristics of the Japanese market compared to the US and UK, for those considering business there. Note that this ends in a promotional piece for Eurotechnology, but the rest of the information does not seem promotional in any way.

I cannot do better than the first sentence of this Financial Times report to summarize the whole story:

Winter bonuses at Japanese companies are rising at the fastest pace since 1991, providing further evidence that corporate profits are finally feeding through into wages.

The New York Times has offered up an analysis of Japan’s positive economic signs, a common theme in the news recently. They manage to do so with a lot more depth than the typical news piece, however. Here’s just a taste:

Even more important [than Koizumi’s reforms], they say, has been a slow but steady revolution in Japan’s clubby business culture, as hard times forced companies to become leaner and more aggressive. Japanese managers have been discarding their traditional distaste for confrontation and ending lifetime job guarantees. And the companies are investing heavily in new technology.

Well worth reading.

The headline reads like this: Japan productivity lowest in G-7. This means it trails behind the United States (highest in productivity of the seven), as well as Britain, Germany, Italy, France and Canada, the other G-7 members.

This is nothing new, but I must admit it was news to me. Actually, it hit me like a ton of bricks. After all, the Japanese work environment is known for the extreme demands it places on its workers, long work hours and short vacations being the norm. Furthermore, the Japanese have gained a reputation for discipline and industriousness, something that does not go unnoticed by most foreign visitors. In short, they seem to be working longer and harder than the statistically more productive citizens of other industrialized nations. What’s going on here?

I investigate further, and find that the BBC has touched on this problem, in an article from October of 2004. But Time Magazine really nailed it in a fascinating article published a couple of years prior, a must-read for anyone even mildly interested in Japanese economic affairs.

I won’t attempt a thorough analysis of the situation as I’d just be recycling the whole Times article, but a few points summarize the situation well:

• Anti-competitive government policies are at the root of the problem:
  

  Shielded from competition by a tangle of government subsidies, tariffs and protectionist policies, the nation’s domestic manufacturers and services have hardly changed—let alone improved—for decades.

• Despite this, export industries are still faring very well:
  

  According to that report by McKinsey, Japanese export industries like automobiles, electronics and computer hardware are, indeed, 20% more productive than the worldwide benchmark. But here’s the problem: these industries, once you stop to count them, are quite few in number. Together, they make up only 10% of Japan’s workforce and 10% of its GDP.

• Retailing, in particular, is in bad shape:
  

  Of the remaining 90%, retailing just might be the sickest of the bunch. Large-scale stores are rare in Japan… mom-and-pops are the rule not the exception, making up 55% of the retail labor force. They are, in other words, still the way the nation sells things. And they are woefully unproductive, generating only 19% of the output of the average U.S. store.

This really puts Koizumi’s push for various structural forms in perspective. I do not know how much they are going to strike at the root of the problem, in the face of status-quo lobbying. But if we start seeing some substantial reforms to do away with the protectionism Japan has relied on so far, the economy might start showing some real signs of vitality.

Reuters reports on the Nikkei’s Thursday close above 15,000, and continuing strong performance on Friday. Elsewhere, they report that tech stocks are expected to lead the way.

Despite signs of economic recovery in recent months (foremost being the Nikkei’s strong performance), retail spending was down 0.3% from last year, with clothing one of the harder-hit retail sectors, reports the Financial Times. This is being blamed, curiously enough, on the failure of the government’s “Warm Biz” campaign — an effort to encourage warm clothing in lieu of turning up the heater at work — to create the same level of success so far as “Cool Biz” did this summer.

Tax cuts aimed at promoting IT investments should be abolished next March as planned, according to a Tax Commission subcommittee. The cuts were introduced in fiscal 2003 as a temporary measure meant to last 3 years. The Japan Times has the full story.

Here’s another article analyzing the recovery and the role of Koizumi’s reforms. The Keynsian economic analysis is a little dubious, and MacDonald is a little too eager to cheer on the Koizumi administration as the savior of Japan’s economic woes, but at least he goes into more detail on the reforms than the last article.

The Yomiuri Shimbun has some prospective analysis of the economic revival underway–with the Nikkei expected to reach 15,000 by the end of the year–and the central role that the Koizumi administration’s reforms are expected to play in the revival. Unfortunately, as is all too common in such pieces, explanations of how exactly the reforms will impact the economy is lacking, an omission that tends to lead readers to believe “reform is good” without ever understanding why, or where the problems were in the first place. Perhaps my standards are too high for this sort of article, though.