“Japanese demographics don’t indicate a strong economic recovery until around 2008. After 2008, Japan will offer one of the few good investment opportunities while most of the world economies begin a downturn.” - Harry S. Dent, Jr.

In HS Dent Founder Harry S. Dent, Jr.’s 1989 book Our Power to Predict and again in his 1992 book The Great Boom Ahead, Mr. Dent used the core concepts he developed over the last two decades to unerringly predict that the U.S. economy would reemerge as the global leader and that the so-called “Japanese economic miracle” would collapse. It would be difficult to say which prediction was the biggest surprise.

“To this day, I am regularly asked why I remain pessimistic about Japan’s financial recovery, especially since the other Pacific Rim countries are recovering so rapidly from the brief but severe 1998 crisis,” says Mr. Dent. The data indicates that Japan will continue to underperform the economies of the developed and some developing countries in the Pacific Rim region that, like Japan, already enjoy a high standard of living, have saturated their markets with standardized products and services, and are rapidly adopting computer network technology. Such countries include the U.S., Canada, South Korea, Taiwan, Hong Kong, Singapore, Australia and New Zealand.

The are two reasons that Japan is the exception. First, Japan’s generation trends are very different than those in the U.S. due to World War II. Japan’s “baby boom” occurred prior to the war and not in the decade following it. As a result, its generational cycle runs counter to ours: it is out of phase by approximately 20 years. Second, the character of the Japanese baby boom generation, whose spending peaked between 1990 and 1995, is wholly different than our baby boom generation. The Japanese baby boomers are more like the conformist Bob Hope generation in America. This is the generation that excelled at hierarchical organization and management rather than entrepreneurial activity and innovation.

After this generation’s spending began to wane in 1990, Japan’s stock market collapsed and its economy has been weak ever since. While some experts may claim that this is a good time to invest in Japan, the demographic data doesn’t support this contention. This underlying demographic pattern that explains Japan’s boom and bust periods indicates that demographic spending trends in Japan will continue downward into around 2004. This trend is shown in the chart below.

Japanese spending won’t accelerate strongly until around 2008, when growth in the U.S. will begin to decline. Though Japan isn’t a great investment now, come 2008 or 2009 it will provide one of the select opportunities for diversification and equity growth in the next worldwide downturn. Other countries in Asia, however, do offer good investment opportunities now and over the coming decade. The best, listed in order of their demographic spending strength, are South Korea, Singapore, Hong Kong and Taiwan.