Principal Consultant, SiliconEdge
What Is The Impact of China's Market Implosion & Yuan Devaluation on Japan?
With China's stock market still imploding it will be interesting to see the subsequent impact on Japan's economy --- in both the short-term and long-term.
Will China's economic implosion kill off the huge influx of Chinese tourists and cash which they freely spend in Japan, especially in the ritzy areas of Tokyo and Ginza?
Will the Chinese stock market rout lead to even more Chinese parking their money into Tokyo & Japan real estate as a safe haven (from both future yuan devaluations and capital controls or confiscation)?
Or will margin calls and other liquidity needs see them yanking their capital out of the Japanese real estate market (and the world real estate market for that matter)?
The successive Chinese devaluations of the yuan coupled with their stock market melt down is contributing to the recent strengthening of the yen as a reaction to the market uncertainty as well as a perceived flight to safety.
But it will probably be short lived.
Because Japan is in the midst of a massive but quiet transformation. Japan's corporate cultures and HR departments are now being transformed. High-quality Gaijin are coming on board, often bringing foreign market knowledge and a window into those markets.
These Japanese corporate transformations also include finally looking outward from the Japanese domestic market -- to foreign markets. And these transformations include everything from overseas sales processes, to M&A to rebooting or restructuring existing foreign-based business entities.
But it's all under the surface and not readily evident from afar or from the outside.
This current downward pressure on the Chinese yuan and Japan yen will also surely preclude the United States Federal Reserve Board (FRB) from raising rates -- though the likelihood of the FRB every raising those rates in the short term was always very doubtful from the start, but now the FRB has the perfect, ready-made excuse not to do so -- It's all China's fault, don't ya know.
Instead, Chinese yuan & Japanese yen devaluations will be used as an excuse for the US Federal Reserve Board to continue with QEx.
But how long can this go on before inflation skyrockets in America?
A smart move for Japan during this coming Great Recession is to focus on Factory, Restaurant and Office Automation -- FRO Automation -- for the win!