An expert believes that our understanding of Japan is somewhat biased, although it has always been labeled with terms such as "the lost 30 years," a low-desire society, and deflation. However, the Japanese stock market has grown by 174% over the past decade, and this year alone, the Japanese stock market has surged by 20%.
The Japanese stock market has recently skyrocketed.
What about China's A-share market? Everyone knows it has been hovering around 3,000 points, and even when it rises too much, people believe that the A-share market is bound to fall. Therefore, in the last 20 years, there have only been two major bull markets in 2008 and 2015. At other times, it has maintained a very awkward situation.
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The Tokyo Nikkei Index keeps rising.
So, is Japan really stronger than China? Is the recent Japanese economy really that strong? Let's discuss this issue today.
Are the Japanese economy and stock market really that good?
First, I want to clarify a key point: the economy is the economy, and the stock market is the stock market. A good Japanese stock market does not necessarily mean a good economy.
For example: Japan's GDP was $6.3 trillion in 2012 and $4.3 trillion in 2022, with a 32% decrease in GDP, while the stock market increased by 167%. In contrast, China's GDP was $8.5 trillion in 2012 and $18 trillion in 2022, with a 112% increase in GDP, and the stock market increased by 42%.
Looking at the stock market, China's A-shares have significantly underperformed Japan, but in terms of GDP, we are much higher than Japan. It is particularly important to note that Japan's GDP has not only failed to grow over the past decade but has actually declined, which is a very abnormal phenomenon.
Ten years ago, in 2012, it happened to be the time when Japan's GDP peaked, with a GDP of $6.27 trillion, and the GDP in 2022 has already fallen to $4.3 trillion.Despite the fact that using GDP to measure a country's economy is somewhat biased, it does reveal that Japan's economy is indeed struggling. Compared to China, Japan has not only failed to make progress but has also been continuously regressing.
So, why has the Japanese stock market been rising? The reason is related to the late Shinzo Abe, who was tragically assassinated.
After Abe took office, he implemented an extremely loose economic policy known as "Abenomics." This policy is quite interesting; in simple terms, it involves pushing both the deposit and loan interest rates of banks to near 0%. The advantage of this approach is that it sends a message to the citizens: if you want to borrow money for investment, there is no interest to pay, and the country encourages you to invest.
Similarly, keeping money in the bank yields no interest income, so hurry up and spend it! This stimulates domestic demand and the economy.
Abenomics is, in fact, a product of Japan's "lost 30 years" of extreme deflation, characterized by oversupply and insufficient domestic demand, with everyone preferring to save rather than spend.
Incidentally, China's CPI and PPI levels have declined significantly in recent months, which is somewhat similar to Japan's deflation. Does this give everyone a sense of Japan's long-term deflation?
With no interest on money kept in banks, the Japanese prefer to invest in the stock market. The stock market is quite straightforward: as long as more people buy stocks, the market will rise. This is a very simple principle.
Therefore, over a decade, the performance of the Japanese stock market has been much better than that of the A-shares. It has even surpassed the S&P 500 index for the same period.
Why doesn't the Chinese stock market rise?
Some may ask, why doesn't the Chinese A-share market rise?1. First and foremost, it is related to the compilation of the index.
The Shanghai Composite Index represents market capitalization-weighted stocks, such as industry, energy, real estate, financial banking, and so on. These industries and the representative stocks are relatively stable giant companies with performance and business that basically have no room for imagination. They can be referred to as the so-called "blue-chip stocks."
The purpose of the establishment of the Shanghai Stock Exchange is to "raise money."
The stock prices of these companies generally revolve around a value center, and 3,000 points is an integer position, so we often see that no matter how it changes, the Shanghai Composite Index has always been around 3,000 points.
However, if we observe other indices, such as the ChiNext Index, we will find that the increase from 2012 to now is 200%, and there is still a performance overall.
2. We need to understand that the significance of the capital market settings in China and Japan is different.
What is the original intention of China's capital market? It is to serve real enterprises, so A-shares continue to promote the registration system reform and continuously attract investors to enter.
The purpose of the establishment of A-shares is not to create a "casino" for us to make money. The fundamental purpose is to help enterprises raise funds, allowing enterprises to raise funds through listing, additional issuance, and other means from the capital market, and then to build a series of real projects.
Now, the stock markets of developed capitalist countries such as Japan and the United States are actually dominated by institutional investors, with most of the funds in the hands of financial conglomerates, which is nothing more than a left-right hand transfer.
They are more inclined to raise funds through the stock market, and the main purpose of these funds is to develop enterprises or serve the capitalists themselves, that's another story.In summary, the purpose of China's stock market is to develop the economy, provide financing for businesses, and serve the real economy. In contrast, many capitalists in Western countries actually hold the power of discourse. Numerous executives, CEOs, major shareholders, and financial groups use the stock market to increase their wealth. Warren Buffett and Berkshire Hathaway are themselves super financial conglomerates with so much money that it could last for several generations.
This is the fundamental difference between the Chinese and Japanese stock markets.
Therefore, we must understand why many people lose money in stock trading. In essence, most investors are involved in "short-term" trading and "price differences," aiming to make quick profits. Only a minority invest in blue-chip stocks and earn dividends and interest annually, which is truly "profiting from the nation's fortune."
Moreover, the Japanese stock market is not as good as some people claim.
Firstly, due to the implementation of Abenomics, the interest rates for borrowing in Japan are very low. As a result, a large amount of international speculative capital borrows yen to speculate. After speculation, they purchase stocks of Japanese companies, attracting Japanese investors, driving up stock prices, and continuously increasing the market value of Japanese listed companies. This is the recently popular "Japanese special valuation."
However, this practice essentially means that foreign investors are profiting at the expense of Japanese investors, and the same method would be nearly impossible to implement in China due to various restrictions. Foreign capital can enter and exit Japan at will.
In conclusion, there is no need to envy the prosperity of the Japanese stock market. The rise of the Japanese stock market is actually due to extremely loose monetary policy and driven by international capital speculation, not to mention the continuous devaluation of the yen.
Although the Chinese A-share market has not performed well in recent years, it is closely related to China's economic development and serves the real economy, which is the original intention of establishing the A-share market. It is true that individual investors have suffered, but listed companies have indeed received funds and carried out some projects.As investors, we naturally hope that the stocks we buy will rise immediately. However, as ordinary Chinese people, we should not be overly concerned with the ups and downs of the A-share index, but should focus on the improvement of China's economic data and structure.
After all, the stock market is the stock market, and the economy is the economy.
Therefore, what China needs to do is to improve the quality of the economy, expand domestic demand, and promote the development of consumption. The stock market should continue to deepen reforms, reduce excessive speculation, and serve the development of high-quality enterprises. Only when China's economy achieves high-quality development can the A-share market hope to usher in a real bull market.
The future of China lies not only in the stock market but in the transformation and upgrading of the entire economic system. Once the economic fundamentals are solid, A-shares will naturally usher in new opportunities.
After all, the stock market is just a small part of the economy. Economic development, a prosperous life for the people, and everyone having money to spend is the real truth!