I was asked the other day what was a good book or film to watch to understand Japan better. I suggested that Tom Cruise’s Last Samurai. Its a movie with some serious problems, but it does manage to capture aspects of the Japanese desire for perfection. I also suggested the Tom Selleck vehicle, Mr Baseball. It is a great movie about foreigners living in Japan and culture shock. My friend told me he was not much into movies, so I said to him, you could read some Mishima. I was shocked that my well read and travelled friend had never heard of Yukio Mishima. He was nominated for the Nobel Prize in Literature five times. But that is probably the least interesting thing about him.
Mishima was an ultra nationalist, and in the 1970, he gained access to Japanese military base, and tried to rouse the soldiers to reject the constitution that America had written for Japan after World War II, and restore the Emperor to his rightful place and reject Western influence. When his attempted coup failed, he committed seppuku at the age of 45. While I am not sure about his beliefs, I like the commitment.
The irony of Mishima was that if he lived another 20 years, he would have seen Japan rise to be the mightiest economy in the world. However, if he had managed to live another 30 years after that, he would have seen Japanese market suffer a decline to be back where it was relative to the world as it was in 1970. No doubt a now very old Mishima would be urging a Japanese revival again. He would celebrate the rise of 参政党 (Sanseito) - a party that mirrors many of his views. I fear Japanese nationalism, but as the chart below suggests, perhaps a “Japan First” mentality is now required, at least financially.
One of the more extraordinary things about the chart above, is that it has not really been driven by poor returns to Japanese equities - at least recently - but more by US exceptionalism. In dollar terms, the Japanese market has just broken out. Below is the US listed Japanese ETF - EWJ US.
Shares outstanding in EWJ US (MSCI Japan ETF) are well below highs. I do not feel like anyone is chasing this trade.
But what would a Japanese revival look like? In one of the great ironies of life, Japanese revival under the Meiji Restoration not only praised the Emperor and the Japanese way of life, but also ushered in the wholesale adoption of Western industrialisation. I think this Japanese revival is adopting Western financialisation.
