All
the attention may be on China and its apparently inexorable return to
being the world’s largest economy, but the real success story of Asia – if not the world – in 2005 is Japan.

Its sharemarket has
gone up 36% and is undoubtedly the hottest in the world: foreign
investors ploughed $US41 billion into Japanese shares between July and
September. As one analyst said this week: “There are two views about
Japan: bullish and very bullish.” The economy appears to be on a
sustainable growth path and even property values are starting to rise
again.

It is the second coming of the Rising Sun after 15
years of deflation and depression. What’s more, it is not simply due to
the passage of time; it isn’t entirely, or even mostly, cyclical. In
that case, the new Japanese boom has a long way to run.

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