In the wake of the landslide Sept. 11 election victory of Japanese Prime Minister Junichiro Koizumi?who ran on a platform of economic reform, including privatization of Japan’s bank-like post office?Pauline Lee, a Hong Kong-based fund manager for Investors Group, spoke to staff writer Jeff Sanford about changes she sees in the world’s second-biggest economy.
“The post office has 24,000 outlets and 270,000 employees, one-third of the civil service and $3 trillion in assets. Part of the mandate of the new government is to downsize that. It’s very important politically since that money has often been used for politically motivated purposes; this reform will put that money to productive uses.
“The election [sent] a strong message that the Japanese want reform. It’s a mega-change in terms of mindset. But that’s only part of the story. GDP in the second quarter was 3.5% annualized, three times the original estimate. Private spending and consumption were up. Housing starts came in strong, while we’ve seen a shift from part-time to full-time employment, and this March prices on real estate in certain areas of Tokyo began rising, the first increase in 15 years. That suggests the period of deflation is ending.
“[Corporately], shares have moved to more active shareholders. And profits have turned around, and free cash flow in corporate Japan is looking good. The turnover in the [Nikkei stock] market on [the day before the election] was ´3 trillion [$31.5 billion], a level not seen since 1989. Even though expectations about Japan are still quite low, so far it looks like a recovery. I think the positives outweigh the negatives.”
