Tokyo remains the cheapest source of capital on the globe and is fueling asset inflation worldwide in equity and commodity markets. Global financial markets have become so sophisticated that traders can borrow cheap money in Europe and Japan as easily as they can in the United States, to leverage their purchases of natural resource stocks, crude oil, gold, or even Brazilian and Russian bonds, all benefiting from soaring commodity prices.
Tokyo’s Nikkei-225 stock index finished 40% higher in 2005, its biggest annual gain since the 1980´s asset bubble, on expectations that Japan’s once morbid economy can post steady growth and exports. Foreign investors bought a net 10.21 trillion yen of Japanese equities, a record for a single year. Land prices in Tokyo, which had fallen 80% since peaking in 1990, rose last year for the first time in 15 years. In “hard money