The Bear Is Mauling Japan’s Money Printing Bubble

Japanese stock investors trying to escape from bear territory may want to prepare for a long and painful road back.
Since the Nikkei 225 Stock Average tumbled more than 20 percent from a peak last month, Japanese equities have made several attempts at rallies, only to falter as the market gets swept along in a global selloff spurred by tumbling oil prices. Even optimism over central bank stimulus – a frequent rescuer of stocks during the bull market – has failed to spark a sustained rally.
History supports the view that the recovery will take time. Wiping out a bear market takes seven and a half months on average, according to an analysis of the index’s 14 occurrences since 1989. Worse, shares tend to fall further after the initial 20 percent drop – the Nikkei has slid an additional 18 percent on average, according to the data that include steep selloffs in the early 1990s, the Asian financial crisis, the dot-com bubble and the global financial crisis.

This post was published at David Stockmans Contra Corner on February 5, 2016.