December 29 marks the twenty-ninth anniversary of the high-water mark in Japanese stocks.  On that date in 1989 the Nikkei 225 Index closed at its all-time high of 38,915, but within months fell into “bear market” territory.  It has never recovered.  It’s astonishing to realize that the Nikkei today is 48% below its historic high. The main reason for this is because Japan has been fighting the effects of deflation since the early 1990s. To try to reflate the economy, Japan brought short-term interest rates down to zero in 1994, the first major economic power to do so.   Since then, its short-term interest rates have been near zero, and sometimes negative. The Bank of Japan has never been able to “normalize” interest rates back to their pre-1989 level. One lesson to be gleaned from all this is that a bear market is not merely the name given to a sharp, but transitory, decline in stock prices caused by periodic fluctuations in...(Read Full Article)