Craig Freedman (Professor, Macquarie University, Australia)
This comment originally appeared in the "Japan-U.S. Discussion Fourm" (http://lists.nbr.org/japanforum) on May 20, 2002: posted here with the author's permission.
Let me respond to Sean Curtin's question by comparing the current situation to the last cyclical recovery. Many of the reports appearing in the financial and business press of that period were similar to those now in print. 'Japan had bottomed out. It would be wise to jump on the train before it left the station.' In other words, if one didn't buy now there would not likely to be another such opportunity. My recollection is that a good deal of foreign money poured into the market at that time and was in part responsible for that jump. Some of it of course was driven by Japan's own version of dot.com mania. The Japanese banks seized the opportunity to dump some of their portfolio of shares on the market at that time buffering some of the frenzy.
I would think that caution would still be advised. Herd like mentality can move markets in the short run. But there are still fundamental problems with the Japanese economy.