Japan's banking stocks have been out of favor for a while. The sector's index is down 12% in the past 12 months versus a 1.2% drop for the TOPIX, and the average forward P/E of TSE 1st section banks is 9.9 compared with 16.80 for the TOPIX. The decline in bank equities in part reflects a general market downturn since August, which stems from the yen's rise against the dollar and fears that problems in the US subprime sector could cause a worldwide recession. The major banks' exposure to the subprime market and securitized assets makes them especially vulnerable to loan quality concerns.

On October 25, Nintendo (NTDOY.PK) reported very favorable mid-term results for the six months ended September 30. Operating income rocketed 180% to ¥188.7 billion yen, and net profit jumped 140% to ¥132.4 billion. The share price has climbed steadily for the past 18 months, with the Company's market cap surpassing even Sony's (SNE); only in recent days has the stock retreated a bit as U.S. and Japan markets turned downward.

In his new book, The Shock of the Old, David Edgerton continues to question the emphasis most technology historians place on innovation and invention. Instead, he insists that at any particular time it is older technologies that do most of the work. A prime example is the bicycle, whose annual unit production still exceeds that of the automobile and continues to show steady gains.

Edgerton's thesis is controversial, but the ability of Shimano (SHMDF.PK) to capitalize on enduring strong demand for bicycles is not. Founded in 1921, this premium, high-end, Japanese bike parts maker provides an integrated line of products, including shifting gears and driving and braking components. The Company also makes fishing gear and snowboards, but bike components represent more than 70% of sales, the majority of which are in the US and Europe.

The August 21 issue of Nikkei Money, a magazine on Japanese investing, had a poll of individual investors regarding their views of the Japanese market and promising stocks. Of the names investors are paying most attention to now, the number-one choice was somewhat surprising. Leading such internationally known blue-chip companies like Toyota (TM), Sony (SNE), and Honda (HMC) was Tokyo Electric Power, or TEPCO (TKECF.PK), the normally stable (and boring) utility that supplies 30% of Japan's electric power.