Poppity Pop-Pop

Is Japan 2013 just a rerun of America 2007? Hmm:

Japanese equities were basically the hottest major asset class in the entire world before today’s bloodbath, posting 20.9% cumulative gains over the past three months alone.

Last night, though, sparked by the first notable sell-off in three weeks in American stock markets – and really driven home by new data overnight that revealed the Chinese manufacturing sector has unexpectedly dipped into contraction – the Nikkei 225 plummeted 7.3%, marking its biggest single-day drop since the earthquake that ravaged Japan two years ago.

That takes the Nikkei back to levels not seen since May 9 (it’s been moving quickly on the way up).

At least one analyst finds the drop-off in Japan reminiscent of the Lehman Brothers collapse in 2008 that unleashed turmoil on markets.

“Lehman-like in Japan,” writes Société Générale foreign exchange strategist Sebastien Galy in an email this morning.

We’ve been assured for months now that BOJ’s massive fiscal stimulus is just the thing to generate “real” growth in Japan’s long-moribund economy. Instead — pop goes yet another bubble.

If Japan wants robust growth again, it needs to end the cozy relationships between Tokyo and the keiretsu, do something about its rapidly aging population and shrinking workforce, and let the yen take care of itself.

Look, finance is important. But national governments around the world treat it as if it were the only thing. But finance is just one tool needed in the beginning of creating real wealth, which must still either be manufactured, mined, or farmed. Governments hinder all three methods, while juicing the finance side and wondering why nothing happens.