We hope that Japan is gradually escaping a prolonged period of deflation that has impeded economic growth, stifled investment and put downward pressure on wages.
According to Nikkei Asian Review today, cash-rich Japanese companies have finally opened their wallets for pay raises and growth investments, helping spur the stock market even higher on hopes for stronger consumer spending and the start of a virtuous cycle.
Looser monetary policy worldwide has created a flood of money overseas. These funds are flowing into Japanese stocks amid expectations for change, said Takashi Ito of Nomura Securities.
In another shift, listed companies are starting to put their record 90 trillion yen ($735 billion) in cash toward wage hikes and growth investments. Mergers and acquisitions by Japanese companies involving foreign businesses are climbing to all-time high in the January-March period, already reaching roughly 4 trillion yen. Canon and Asahi Kasei, among others, are going ahead with major purchases.
Meanwhile, Toyota Motor and other giants enjoying strong earnings are expected to proceed with pay raises.
Europe has the problems in Greece to worry about. Money has started to flow out of emerging markets again in anticipation of a U.S. rate hike. Turning hopes for a sustained rally in Japanese stocks into reality will require economic stability domestically and overseas as well as active use of cash by Japanese companies.