Japan's 2022 Expected Covid Recovery Leads to New Investing Trends
October 4 2021
Japan is a small country in terms of area, but its economy is the world's third-largest. Only the U.S.A.'s and China's economies are larger.
Effects of Covid-19
Japan has suffered badly from Covid-19, with low vaccination rates compared to other developed nations. The common anti-vaccination feeling pre-dates that in the U.S.A. and follows on from the way previous vaccination side-effects were handled by the government. There is widespread distrust of politicians and media, leading to the idea that Covid-19 vaccinations are some kind of trick.
This anti-vax feeling has delayed recovery, but 2022 should see a return to growth.
A Positive Outlook for 2022
Cars are a large part of Japan's exports. These exports have been drastically reduced by Covid restrictions in North America and Europe. Travel restrictions meant nobody has been driving the cars they bought in 2018 and 2019. These vehicles are still like new, so owners are not trading in.
Car owners are expected to resume normal trading-in and buying behaviors in 2022. So car exports should return to historic levels.
Pre-Covid, Japan exported almost 5 million new cars every year.
Stock Market Trading
With nationwide shutdowns, people have had time on their hands. A lot of people have used this time to develop their understanding of investing principles.
Turning to the stock markets, including CFDs and index trading, has allowed small investors stuck at home to seek extra income and develop a skill set they will be able to use going forward.
One reason CFDs (contracts for difference) are popular with new investors is that they can benefit from stock price movements without owning any shares. They are risky, and you can lose many times the original amount you invest.
You can reduce the risks of CFD trading, and anyone thinking of investing using these instruments must research the field and educate themselves before investing.
Many online trading platforms offer demo accounts so you can earn your CFD wings without risking your capital. If you lose all the sim-cash in your account, treat it as a free learning experience and start over again. Only switch to a live real-cash account once you are certain you know what you are doing.
Understanding CFD Jargon
When you trade CFDs you enter into a contract that pays out according to the difference between the value of the product when the contract is taken out, and the value at the end of the contract.
You can make money when markets are falling. You sell at a higher price before you own the product. You then buy at the (hopefully) lower price when the contract expires. This is known as 'Going Short.'
When markets are rising, you buy at the lower price at the start of the contract and sell at a profit when the contract ends. This is known as 'Going Long.'
Real money is made, AND LOST, by using leverage. If you have $1,000 in your trading account you can buy CFDs worth many times that amount, often $30,000. The logic is that the price won't hit zero, so short-sellers shouldn't lose all $30,000, but it is not uncommon to lose more than your initial $1,000 stake.
Leverage, when you go long, is also risky. Your stock CFD could fall in its price instead of rising. You then cannot recoup your original $30,000 because the stock price has fallen. You still have to pay what you owe.
- You need to decide on stop-loss and take-profit positions before you enter into any CFD contract
- You must follow prices over the lifetime of your contract
- Never hold a CFD position overnight or over the weekend
Index trading is a good way for new CFD investors to get their feet wet. The risks with a basket of stocks are lower because even if one stock crashes unexpectedly, the effect will be less because of the other stocks in the index.
Japanese investors often prefer to trade the Nikkei index. This makes sense because investors understand any local news that affects stock prices. It is also better to buy or sell index CFDs before the relevant share market closes.
What Does the Likely 2022 Japanese Recovery Mean for You?
It's always good to buy at the bottom of the market. The Japanese recession has been a long one. The Nikkei is likely to grow in 2022 as the Japanese economy benefits from the post-Covid bounce that has helped the Dow Jones and European indices gain through 2021.
CFDs offer you a way to make money if the market falls rather than rises as expected. Start researching CFDs now. Open a demo trading account and see if you can make money with that. Initially, you should think about trading an index such as the Nikkei because of the diversification it offers and the consequently lower risk.