Jesper Koll on the generational and financial shift reshaping Japan
In this episode of Benny and the Squirrel recorded on September 3rd, Rupert and Ben are joined by Japan strategist Jesper Koll, author of The Japan Optimist and a former strategist at JP Morgan and Merrill Lynch.
Koll has spent decades following Japan’s economy, markets and corporate sector, giving his views particular weight when he argues that the country may be entering a very different economic phase.
Speaking the morning after another bout of yen intervention, he discusses the significance of the ¥160 exchange-rate level, the scale of the government’s JPY 370 trillion industrial strategy, the pressures limiting how quickly the Bank of Japan can raise rates, and the possibility that more Japanese capital will be invested at home.
Since this episode was released, the BOJ raised its policy interest rate by 25 basis points to 1.25% on September 18th.
The conversation also covers regional banking risks, changing US-China dynamics and the generational shift reshaping corporate Japan.
Key Topics:
Koll sees ¥160 to the US dollar as an important political threshold because further yen weakness would intensify the pressure on Japanese household purchasing power.
He believes Japan is entering a much more serious phase of industrial policy, with long-term government support aimed at reshoring investment into areas such as AI, robotics, defense and advanced manufacturing.
He argues that today’s policy shift is fundamentally different from Abenomics because Japan is no longer fighting deflation and instead faces inflation, higher interest rates and tighter economic conditions.
He thinks the economics of investing inside Japan are becoming more attractive, creating the potential for Japanese corporate savings to stay at home rather than continue flowing overseas.
He believes the Bank of Japan is constrained from raising rates quickly not only by government debt, but by the vulnerability of regional banks, credit cooperatives and insurers to higher bond yields.
He expects higher Japanese bond yields to make domestic fixed income increasingly attractive, although he does not expect a sudden or disorderly repatriation of Japan’s overseas assets.
He sees a major disconnect between foreign enthusiasm for Japanese assets and the continued reluctance of Japanese investors themselves to fully embrace the domestic investment story.
He believes generational change inside corporate Japan could be one of the strongest forces reshaping the economy, with younger executives more willing to pursue M&A, management buyouts and restructuring.
He sees Japan strengthening its economic and security ties across the Indo-Pacific as a hedge against greater uncertainty in both its US and China relationships.
