Crashing oil prices might be a bit of good news for the struggling Japanese economy.
Already, Japan’s economy has seen a positive effect from the decline in oil prices, but the continued drop could be good news for both Japanese stocks and the Japanese consumer.
“Japan benefits from lower oil prices as it’s a big importer,” writes Citi’s Robert Buckland in a recent note to clients.
A welcome benefit, as Japan’s economy unexpectedly slipped into recession during the third quarter, as growth contracted at an annualized pace of 1.6% in the quarter.
Buckland writes that “the decline in oil prices, along with moderate growth in nominal per-capita wages and employment is likely to boost the real purchasing power of Japanese consumers.”
And in addition to the consumer gains, Japanese equities outperform by approximately 30% on a relative basis over a five year period, and by slightly more than 20% over a ten year period, following oil price declines.