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Japan understands the post-ww2 economic world order very well. There is one first tier exceptional nation that gets a huge dividend from having the reserve currency but must spend a large chunk of it to militarily enforce the world order.

Japan, along with western Europe, is a second tier nation in this order. They live well enough and enjoy most of the same benefits without the expense of policing the world. Japan would rather abide by the rules and wishes of the US than risk getting demoted down a tier. It accepts its place in this hierarchy because after all its a fairly prestigious place.

Would the US now all of a sudden allow Japan to grow again? Yes, because Japan is a dependable loyal ally and the US needs a counterweight to China.

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I don’t think Japan had a lot of choice in the Plaza Accord agreement other than to say they were going to go Communist. The US gave them unprecedented access to our markets as a way to make them stronger to fight off the Soviets. At a certain point as they approached US level GDP that became ridiculous and the US wasn’t going to allow it to continue. The political pressure here was too great. I think Pettis and Klein really got this dynamic right in Trade Wars are Class Wars. But it ended up being a pretty good outcome for both sides. The average Japanese person’s standard of living has improved a lot faster after the bubble burst in the late 1980s/early 1990s when all there savings weren’t being plowed back into inflated assets and malinvestment so from that perspective I don’t think they were super motivated to change the trend.

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Further bolstering this thesis is the fact that Japan has decided to beef up their military significantly over the last 5 years in response to the china threat, particularly their Navy. Japan is moving from timid self defense to being able to project power. I like it.

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Conspiracy, hmmm, but the thesis is sound. I too think that the issue is very much one of mindset. Japan rebuilt itself from razed rubble to the world's second largest economy, inside 25 years. The leaders of that generation, with some justification, felt therefore that they had all the answers, and so did the rest of the nation. While that generation had influence or presence, it was virtually impossible to chart any new or novel course that did not align with their views and methods. However, as the Showa generation finally dies off (literally), the post-bubble generation is taking over, and THEIR life learning is "we must do things differently to survive". So yes, I think the extraordinary pace and range of change in Japan at the moment is very much a conscious choice, but it's driven by a combination of history and demographics.

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I think in Japan they often issue funky products with many features just to learn something. Just to learn something has big value i this culture. It's not just about $$.

Was that a PHS phone you had? I remember those. I had one but to be honest the poor range and not being able to move between base stations quickly made it redundant.

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The idea definitely makes a lot of sense. I know you're favorable on the Japanese banks. Do you think they'll be the best way to capture a new Japanese bull market if that's what we see? Or do you see them as more of an idiosyncratic way to capture the pro-labor theme? Not sure if you saw GMO's recent Japan pitch, but they argue that small cap value in Japan is the place to be. Does that make sense to you? You can find their article here- https://www.gmo.com/americas/research-library/the-four-4s-behind-the-compelling-opportunity-in-japan-equities_whitepaper/

Thanks

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Shouldn't the Y-axis of the Yen chart be USD/JPY instead of JPY/USD?

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