Steven Towns

Merrill Lynch's Jesper Koll, "Japan is Back, For Real This Time"

hypertokyo,

You're right, Koll is one among many economists and analysts (including myself) that recognize the current recovery in Japan; and this one being a sustainable one unlike previous false starts.

The U.S. real estate market is potentially the bubble equivalent of the tech run-up in the 90's and disaster post-March '00. Anticipating the threat of a real estate crash the Fed has been warning of "frothy" markets but the consensus seems to be there will be a "soft-landing."

That being said, in response to your question, I would say the impact on Japan of a U.S. economic slump will depend on the severity and timing of the slump. Japan is becoming less dependent on the U.S. but a high level of dependence still exists, and especially in areas such as autos.

I personally don't foresee a national real estate crisis -- which is said to be the catalyst that will most adversely impact the U.S. economy -- rather there are certain over-valued pockets such as Miami, Portland, and San Diego that will ultimately experience price corrections.

Therefore, I don't necessarily expect an imminent U.S. economic slump. Instead, I look at strong corporate earnings and solid Q3 economic performance in the wake of natural disasters. I think robust U.S. economic growth continues into '06 and possibly '07. After that, if the U.S. economy were to slow then we would have to evaluate how much Japan has recovered and its ability to grow against a weakening U.S. economy.