Reading the "Invisible Crisis" of the Times: Where is the Landing Point for the Straying Market?

Writer Profile

Koichi Kurose
Other : Chief Strategist and Chief Economist, Resona Asset Management Co., Ltd.
Keio University alumni

Koichi Kurose
Other : Chief Strategist and Chief Economist, Resona Asset Management Co., Ltd.
Keio University alumni

2020/07/16

When observing financial markets for a long time, one truly understands that "history repeats itself." This repetition is not merely a cycle of good and bad economic phases. Economically, the creation and bursting of bubbles repeat roughly every 10 years. Socially, excessive shareholder favoritism and worker protection also repeat every 30 to 50 years.

In recent years, excessive shareholder capitalism has faced strong criticism for causing inequality and anti-globalization movements. Typical examples include actions by global corporations to maximize shareholder profit, such as cutting employee wages and relocating factories to emerging countries in search of lower costs.

Excessive shareholder capitalism should be corrected. However, it is also a problem if the pendulum swings too far in the opposite direction. The issues can be broadly divided into two categories. First is the risk of leaning toward excessive worker protection in a way that harms shareholder interests. Second is the risk of anti-globalization intensifying into a de facto struggle for hegemony between the U.S. and China, amid support for "America First" within the United States.

Due to these two risks, there is a possibility that the 1970s in the United States could be repeated. During that time, the U.S. domestic economy stagnated and high inflation progressed. Its prestige in the international community plummeted, leading to the dollar crisis and the Carter crisis. Naturally, stock prices also stagnated.

My primary motivation for writing this book is a sense of urgency that we must not repeat these mistakes. This perspective should also be beneficial for securities investments, such as stocks.

The risks are not limited to the United States. Since the end of the war, the U.S. social system has consistently served as a global precedent. It should be assumed that, over time, these effects will spread to Japan and the rest of the world.

Japan, in particular, faces problems that could be called "underlying conditions," such as a declining population, fiscal deficits, and the inability to achieve economic revitalization in terms of autonomous growth, even if economic recovery can be achieved through policy measures. In this book, I also present a blueprint for solving these problems.

Finally, regarding the COVID-19 pandemic, it will likely make the "invisible crisis" more clearly "visible." Particularly problematic are the further increase in debt for nations and corporations and the intensification of the U.S.-China struggle for hegemony. As a result, the timeline for problem-solving is likely to be shortened.