For long-term investors, where does the future growth potential of the Japanese stock market lie? Is it in new technologies or globalization?

Hello, it's great to chat with you about this topic. The Japanese stock market is indeed very hot lately, and many people are concerned about its future potential. That's a great question you asked: is it driven by new technology or globalization?

Actually, this isn't an "either/or" question. For Japan, the future growth potential lies precisely in walking on both legs – "new technology" and "globalization." They are complementary and indispensable to each other.

Think of it like a world-class top chef opening a new restaurant:

Globalization = His restaurant is located on the world's busiest high street, with massive foot traffic, attracting diners from all over the world.
New Technology = His exclusive new dishes and cooking techniques create unique, delicious flavors no one else can replicate.

Without the new dishes, even a great location won't attract notice; without a good location, even amazing dishes won't retain customers. The future of the Japanese stock market hinges on the perfect combination of these two.

Let me break it down for you to make it clearer.

I. Globalization: Japan's "Foundation" and "Amplifier"

Many people think of Toyota cars or Sony PlayStations when they hear about Japan's globalization. That's certainly true, but Japan's role in globalization today is deeper, more "hidden," and more crucial.

Global Supply Chains of "Hidden Champions"
- What does this mean? In many high-tech fields like semiconductors, precision instruments, and new materials, Japanese companies might not produce the final product (like an iPhone), but they produce the core materials, components, and equipment essential for making that product.
- An example: The world's most advanced chips require a material called "photoresist," and Japanese companies hold an almost monopolistic position in this field. This means whether it's Apple, Samsung, or Nvidia chips selling well, they all need to buy this "raw material" from Japanese companies.
- Investment Implication: This means Japan's economic growth isn't just dependent on the success of its own brands; it's deeply intertwined with the global tech development chain. As long as global demand for high-tech products grows, these "hidden champions" will keep making money. They are the "water sellers" of globalization.
Riding the Tailwind of Yen Depreciation
- The yen has depreciated significantly recently. While this is bad for us traveling abroad, it's a huge boon for Japanese exporters.
- Simply put: The same Japanese-made machine that used to cost a US customer $10,000 (at 1 million yen) might now cost only $7,000. The price advantage becomes immediately apparent, naturally leading to more orders. This directly boosts the profitability and global competitiveness of Japan's export-oriented companies.

Therefore, globalization is the stage for Japanese companies to perform. The bigger this stage, the greater their potential.

II. New Technology: From "Follower" to "Deep Diver"

We used to think Japan was slow in emerging fields like the internet and software, but that's changing. Japan's "new technology" strategy isn't about competing head-on with China and the US on platforms or business models; it's about leveraging its strengths and digging deep technologically in areas where it excels.

The Semiconductor Industry's "Comeback"
- While Japan fell behind in the final stages of chip manufacturing, it remains the absolute leader in upstream equipment and materials. Now, against the backdrop of global supply chain restructuring, the Japanese government and companies are investing heavily to regain a significant foothold in chip manufacturing itself. This is a huge boost for the related industrial chain.
Automation and Robotics Technology
- Japan's severe aging population and labor shortage are forcing continuous breakthroughs in automation and robotics. From industrial robots in factories to service robots in hospitality and nursing homes, this addresses domestic needs and represents technology that can be exported worldwide.
New Energy and Environmental Technology
- Beyond electric vehicles (EVs), Japan is investing heavily in R&D for next-generation technologies like hydrogen energy and solid-state batteries. Breakthroughs in these areas could be disruptive. While Toyota might seem slow on pure EVs, its deep expertise in hybrids and hydrogen is formidable.
"Soft Power" like Anime and Games
- Don't underestimate this. Nintendo, Sony PlayStation, and globally popular anime IPs are themselves "new tech" products combining creativity and digital technology. Through globalization, they bring Japan immense cultural influence and substantial revenue.

Therefore, new technology is the "secret weapon" for Japanese companies to win in global competition.

To Summarize: Implications for Long-Term Investors

For an ordinary person looking to invest in the Japanese stock market long-term, the story you need to focus on is this:

Japan is leveraging its deep technological expertise (New Technology) to manufacture critical products and materials the world can't do without, then selling them through global markets (Globalization) to generate profits.

Simultaneously, two important "catalysts" are at play:

Corporate Governance Reform: The Tokyo Stock Exchange is "pushing" listed companies to prioritize shareholder returns more, such as increasing dividends and stock buybacks, putting previously hoarded cash to work. This is a tangible positive for stock prices.
The "Oracle" Buffett's Endorsement: The fact that steady investors like Warren Buffett are making significant investments in Japanese trading houses (sogo shosha) signals that the value of Japanese companies in the global supply chain is recognized by top-tier capital.

Therefore, the future growth potential doesn't rely solely on new technology or solely on globalization. It relies on "Japanese companies mastering new technologies" playing an indispensable role in the wave of globalization.

Hope this explanation gives you a clearer view of the Japanese stock market's future!