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Why are many investors trusting Japan again?

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It is one of the most admired countries worldwide, especially for its technology and civility, but at the same time, it stands out for being ‘armored’ from the outside. Trade, investment or the percentage of foreign population are good proof of this. Perhaps this explains why Japan’s economy has lagged behind in recent decades. However, the scenario could change in a few years.

Japan is one of the countries that generate the most collective fascination in the world is not news. Even less in the midst of a sporting event such as the World Cup, a date on which Japanese fans, tourists and athletes always receive praise from other nations for their civility. The images of their immaculate changing rooms or of the fans cleaning the stands after the matches circulate through social networks and the media as an example for the rest to follow. All this admiration that Japan arouses for its culture, its traditions and its advanced technology contrast with another reality that is perhaps more difficult to guess Japan is one of the most closed countries on the planet.

This may be so surprising because there is a general impression that, at least economically, Japan is a country that is very open to the world. However, nothing is further from reality. For example, it is one of the developed countries in which exports have less economic weight. These only account for around 15% of the Gross Domestic Product (GDP), while in others, such as Germany, they reach almost 45%. In Spain, they represented 28% in 2021.

But it’s not just about trade. Japan is also one of the countries with the least Foreign Direct Investment in the world. In fact, it accounts for just over 4% of its GDP, one-eleventh of the average for developed countries. And if we take a look at immigration and foreign professionals, the same thing happens. Only 2.3% of its population was born outside the archipelago.

This kind of international isolation is particularly surprising in a country that has been losing population since 2011 and which, since the early 1990s, has lived in a kind of chronic stagnation. It was precisely in 1990 when the balloon of a country that seemed to be ready to take on the world burst, its growth was spectacular. For almost two decades, between 1955 and 1973, the Asian country grew at an annual rate of 9%. And in the following 17 years, it continued to do so for 4%. This is how it arrived in 1989, having become one of the richest countries in the world, its technology industry set a global trend, its citizens had more and more purchasing power and its real estate market worked like a Swiss watch.

But in 1990 everything fell apart and Japan was plunged into a total crisis from which it has never fully escaped. So much so that it went from being one of the countries with the greatest economic potential in the world to occupy 35th place in terms of GDP per capita, according to World Bank data. Despite all this, many analysts still argue that the country can be a great opportunity for investors from around the world. So the questions that analysts are asking are: Why has Japan lagged behind the rest of the developed countries in the last three decades? What lessons can be assimilated from the case of Japan? And perhaps the most important question of all is why do more and more investors consider that the Japanese stock market can bring many joys in the coming years?

This article was originally published on EL PAÍS