[Tokyo] - Having rolled off the plane and successfully navigated the wilds of Tokyo's notoriously busy subway system on my way into the city, I made a beeline for my favorite guilty pleasure - the neighborhood sushi shop.
And the questions started almost as soon as I sat down elbow to elbow with other patrons...
...what did I make of Trump?
...would he be a "real" president?
...is he as unpredictable as he seems?
As always, it wasn't so much the questions that interested me, but rather, the unspoken "language" driving them.
You wouldn't believe what it says about what's next for your money.
Shock Treatment for Japan's "Lost Decades"
Japan's got every reason to come to terms with Trump quickly and effectively.
It is the world's third-largest economy, a long-time economic trading partner with hundreds of billions on the line, and key to strategic interests here in the Pacific.
But... how, exactly?
Japanese politicians were completely stunned by Trump's victory, which is entirely understandable because they suffer from the same sort of erudite institutional bias that ruling elites all over the world do. They have no idea what to make of Trump's victory, let alone the man.
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Japanese citizens, on the other hand, don't seem to have that problem. Most of the people I've run into on this trip, in fact, are far more pragmatic about a Trump presidency. By and large, they're also respectful, even if the reasons driving Trump's election are not readily apparent.
Most of that is pretty straight-forward. Having spent the better part of my adult life here, I wouldn't expect anything else.
Then, it got real as I reached for another plate of maguro and our conversation took an unexpected twist...
...what if Trump forced Japan to change?
To my way of thinking, that would make him like Commodore Matthew Perry, who steamed into Tokyo Bay in 1853 and forced the Tokugawa Shogunate to open trade after 250 years of seclusion.
We're used to hearing the gunboat diplomacy argument in our history books, as are the Japanese in theirs. Perry wasn't exactly subtle considering he had a fleet of "black ships" with him and punctuated his message with cannon.
Without realizing it, my new friends Masa and Taka were referencing Perry's arrival as the start of more than a century of openness and economic development that happened at jaw-dropping speed. And, by implication, wondering if Trump could be the singular influence that forces Japan to open up a second time.
Not only do I think that's possible, but entirely likely.
Japan's economic machine has languished since the early 1990s, and the so-called "lost decade" that was supposed to be over in a mere 10 years has never ended. The once-vaunted Nikkei trades at only 86% of its peak value, and employment has never really gotten back on track, nor have property values.
Demographics are going in the wrong direction. The nation now suffers under the highest debt-to-GDP ratio on the planet... a whopping 600%+ if you factor in combined public, private, and government debt, according to PIMCO's Jamil Baz last August.
Prime Minister Shinzo Abe's recovery programs are working no better than those of his predecessors, and by all accounts it will take something truly earth-shattering to put things back on track.
For most investors, this is as unthinkable - just as Trump's victory is to longtime Japanese politicians - but for that very reason, it's plausible.
Japan, you see, has a long history of making profound changes that are frequently borrowed from outside influences and "Japanified" as they happen. Written Japanese, for example, originally came from Chinese, as did Buddhism, architecture, city planning, masked drama, and more.
Shortly after Commodore Perry did his thing, a group of forward-looking Japanese leaders and citizens began the Meiji Restoration in 1868. In little more than 10 years, they turned Japan upside down and inside out while engaging in a complete changeover that modernized the government, pried open borders, and completely reformed industry.
As a side note, the 2003 action adventure film, "The Last Samurai," starring Tom Cruise, captures this time period exceptionally well, in case you haven't seen it.
The Meiji Restoration left Japan with a sense of optimism that nothing is insurmountable. That's why, even today - 148 years later - you don't see the Japanese giving up.
In fact, what you see is quite the opposite. Most Japanese believe that the country can change direction if it absolutely has to, and them with it.
I think it's just possible that Trump's shock victory provides Japan with another "Meiji Moment" and that a similar group of forward-looking leaders will emerge to take the country in previously unimaginable directions.
That means a stronger, more entrepreneurial Japan - especially when it comes to small companies, not the exporters we usually talk about. They're the ones with the highest economic incentive and lowest resistance to change. Plus they can move fastest as new opportunities develop because they focus primarily on domestic demand.
A choice like the iShare MSCI Japan Small-Cap ETF (NYSE Arca: SCJ) is a great place to start. It's up about 11% year to date and represents about 40% of the eligible small-cap universe.
The other logical play for a "Meiji Moment" is the so-called "Mother's Index," which is a Tokyo Stock Exchange-listed group of Internet and biotech firms. You can track it by purchasing the TSE Mothers Core ETF (TYO: 1563), if your broker has access.
In closing, I've obviously just scratched the surface here, but I find myself more excited about domestic Japanese markets than I have been in a long time.
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