Merrill Lynch & Co thinks it has spotted some trends in the Japanese technology and telecoms sectors which may point to some broader economic movement. It says capacity utilization, IC shipments, and broad-based electrical machinery shipments have all turned positive in the past six months. Note how a rise in electrical machinery coincided with bull market moves in share prices in 1987, 1990, 1993 , and 1996, the report said.
The report goes on to highlight the disparity between Japanese and US investment in IT, claiming that Japan is several years behind the US in terms of computer downsizing, networking, and the household diffusion of PCs. The divergence between the U.S. (+30%) and Japan (-5%) in technology investment last year was particularly striking. We think this is unsustainable and that technology-related spending is likely to play catch-up with the US in coming years.
