On Friday, March 11, 2011, a powerful 9.0 earthquake hit Japan. Soon after, the country had to brace itself for destructive tsunamis. First and foremost, we would like to extend our thoughts and prayers to the people of Japan during this difficult time. I would like all of our shareholders to know that our partners at SPARX Asset Management and their families are safe. SPARX is operating with
a full staff at their main office located in Tokyo, and all of their compliance safeguards functioned well during this national emergency.
After deciphering the news media, discussing the market implications with SPARX, and using common sense and logic, I am confident that Japan and its people will pull through this tragedy even stronger than they were before. They are a calm, confident, organized and intelligent people who will use their incredible ingenuity to overcome this devastation. Japan has experienced many earthquakes, and in fact when it comes to coping with the aftermath of earthquakes, their systems, infrastructure and architecture are second to none. You need only look at Prime Minister Naoto Kan’s calm, measured and organized response to see they are already coping. He has responded quickly and efficiently to the needs of his people after this earthquake and tsunami, and he is unifying the government and the people with the common cause of restoring Japan.
Many of our shareholders and business partners have contacted me to ask about how I think the Japan earthquake will affect investing in Japan. After any catastrophic event, fear often drives personal and financial decisions. Many investors liquidate and sell into the initial market decline and run to the sidelines. And while this could be financially devastating to financial markets in the short term, I believe, as do our partners at SPARX, that long term the Japanese economy is strong. We do not intend to participate in the market’s downdraft by selling and will make no major changes in our core portfolio strategies for the Hennessy Select SPARX Japan Funds based on these events.
I have said time and again that investing in Japanese equities does not mean just investing in the Japanese economy; it means investing in global companies based in Japan. And I still believe that those Japanese companies should continue to thrive and help to lead Japan out of this devastating event.
The stage was already set for a stronger economy in Japan. Over the past few years, the government has become more pro-business and has opened its borders for more foreign investment and visitation, and companies are more focused on their bottom lines. Japan is the Gateway to Asia and is well positioned geographically and technologically to provide the burgeoning middle class in China with the quality consumer items that they demand.
I want to focus on the prospects for long term positive impact after this terrible tragedy. The Japanese leaders will pull together, and the Bank of Japan will likely do whatever possible to provide liquidity. Japan has returned to the international spotlight as almost 100 countries, including the U.S., have offered their aid.
There will be short term negatives, like with any tragedy, but I believe that the Japanese economy was beginning to move out of a twenty year bear market. I believe that talk of deflation, an aging population, and other negatives will be replaced with talk of Japanese resiliency, ingenuity, and business prowess.
We are confident that the Land of the Rising Sun will rise once again.