The evidence is mounting that after its so called ‘lost decade’ Japan’s economy and markets have at last turned the corner, and may even be on the verge of a new era of consolidation and expansion, says Jonathan Allum in KBC Financial Products’ Big Blah. Japan’s much envied ‘Golden Age’ of economic ascendancy was followed by a era of stasis (c.1990-1998) and an era of contraction (1998-2005). Now, after a decade in which Japanese corporations have shown little interest in expanding at all, a pick up in Japan’s appetite for foreign M&A is one signal that the country’s stock market should once again be on investors’ radar.
In recent weeks, Mitsubishi has again become active, looking to acquire Westinghouse, the nuclear power plant manufacturer, from British Nuclear Fuels, says David Ibison in the FT. Sumida, an electronics company has made a rare hostile takeover bid for Saia-Burgess, a Swiss electronics group. And Kao, the household products maker, is interested in Molton Brown, the UK luxury goods company. According to Thomson Financial, noteworthy deals completed in the last six months include Fuji Photo Film’s purchase of UK ink company Sericol, Oji Paper’s acquisition of the Swiss unit of Ilford Imaging, and Mitsui Sumitomo Insurance’s purchase of Mingtai Fire & Marine Insurance of Taiwan.
All indications are that a ‘full-fledged’ revival in Japanese interest in buying overseas is underway, with Nomura calculating the number of foreign deals up 31% to 156 in the first half of 2005. The overall value of the deals is still relatively small; Nomura puts it at Y498bn, compared with the total value of all Japanese M&A, at Y5,157bn. Nevertheless, the fact that Japanese companies are once again starting to look overseas for growth is a ‘powerful’ sign that there has been a fundamental change in the country’s economic outlook, something that looks set to be reflected in the stock market more than it currently is