: Should I Invest in Japan

The world has been transfixed for the past week by Japan’s heart-rending triple tragedies: the Sendai earthquake, the tsunami and the near-meltdown of a nuclear power plant. Tens of thousands are presumed dead. Radiation escaping from the damaged plants could get worse.Since disaster first struck on March 11, Japan’s stock market has fallen 12% as investors struggle to assess the effects on Japan’s economy. What seems clear to us is that the market has overreacted, as it often does in catastrophes.The slowdown seems temporary. Japan has capacity to rebuild the country as early as possible and healthy growth can expected for next year.

An average stock in japan selling in a 13.9 times of its annual profit and it seems a best time for investors to buy business powerhouse stocks like Sony, Canon, Toyota, Nissan, Nippon, Mitsubishi etc.. Investors can even prefer to buy Nippon steel, Shiseido which are some of the best brands in Japan.

Including BlackRock, number of big foreign investors now heading back to Japan last week. An easy growth of 10% is expected soon even after the calamities.Look at history. In the weeks after Japan’s 1995 Kobe earthquake, stocks fell by a quarter, but then bounced back in a matter of months. After the 2001 bombing of the World Trade Center, U.S. stocks fell 11.6%, before rebounding 19.4% over the next six months.For the four quarters ended December, Japan’s Finance Ministry reported, corporate pretax profits rose 27% as sales climbed 4.1%. At the start of this week, Morgan Stanley MUFG was forecasting 18.5% corporate earnings growth for 2011 and 22.4% growth for 2012. Apply a haircut of 25%–the amount some economists are pruning from their GDP forecasts–and you get still-respectable growth of 13.9% and 16.8%.”The market looks cheap,” says Seiichiro Iwasawa, chief strategist at Nomura Securities. After last week’s sell off, “the market is discounting that next fiscal year’s earnings will decline by 20%. I would say that in the worst case, earnings growth will be zero. There is a big distance between this scenario and the one I presume. I think it’s a buying opportunity.” The recent lows of 8,227 on the Nikkei and 725 on the Topix were “probably the bottom.” Iwasawa expects the Nikkei to rebound soon to as high as 10,000 from Friday’s close of 9,206.Dylan Grice, a strategist at Société Générale, penned a piece entitled “Buy Japan, and prepare to buy with both hands.” Grice pointed out that there were still plenty of risks, but Japan “is beginning to look cheap.” Among the companies whose intrinsic value (book value plus returns in excess of cost of capital) exceed the stock price are Toyota, Sony, Canon, KDDI, Nissan Motor, Nippon Steel and conglomerate Itochu.

This article covers some parts from the original article written and posted by LESLIE P. NORTON. Read her interesting article in full here