A year after the tsunami, whither Japan?

A year ago, shortly after the tsunami, I put up a post entitled, Do something good for Japan. And yourself. Buy Honda stock.

For what it was worth, my stock-picking advice hasn't beaten the market as a whole in the intervening year. Honda (ticker: HMC) has fluctuated between $28 and $40 over the last year, and is currently trading about where it was the day before the tsunami hit. Over the same period, the Dow climbed about 11-point something percent.

In the past year, there's often been a sense in international business reporting that Japan was dealt a sort of final blow by the tsunami, but that it was a failed economy even before that. Much has been made of the country's recent trade deficit, which was the first in decades.

We've recently read of Hero - an Indian motorcycle company - forming a strategic alliance with Erik Buell, and touted as a potential buyer of Ducati. Hero is freed to make such investments because the terms of a longstanding strategic partnership with Honda were allowed to lapse. Motorcycle industry observers might conclude that Japan's significance as a motorcycle manufacturer is destined to shrink while India, China, and Korea are all rising moto-makers. I too have been one to point out that at least in the U.S., the Japanese motorcycle manufacturers' sales are moribund and that the Big Four's American divisions seem conspicuously devoid of imagination.

All that admitted, I recently read a great article on the Globe and Mail's web site which argues that the Japanese economy is in far better shape than most investment experts (or motorcycle experts) acknowledge.

The author, George Abonyi, states...

Seeing Japan’s first trade deficit in more than 30 years as signaling the end of its sustained export success is misleading. Japan has had a current account surplus since 1985 – the widest measure of trade that includes financial inflows such as dividends, interest payments, and royalties – standing in 2010 at $196-billion (U.S.), a more than threefold increase since 1989, during which Japanese exports to China grew more than 14-fold. This helped turn Japan into the world’s largest creditor country, with net international investment position (total domestically owned assets minus its foreign owned assets) estimated in 2010 by the IMF at over $3-trillion. Japanese export performance thrived in spite of an appreciating yen that, paradoxically for a supposedly failing economy, strengthened during global (and domestic) economic crises from more than 120 to the US dollar in 2007 to around 80 today.

By contrast, the U.S. has had a current account deficit since the early '90s, and our historical chart looks downright alarming. So, if you're an American who's worried about Japan's economic indicators, my advice is to dig a bunker, baby, and invest in precious metals - including plenty of lead and brass, if you get my drift.

To read more about the state of the Japanese economy - which still has an enormous impact on every aspect of motorcycling and motorcycle racing - go here.

Luckily for all of us, it's not over, over there. And, while my Honda advice hasn't been too valuable in the year since the tsunami, I still say, hang on to it.