What's going on?

Data out on Monday showed the Japanese economy shrank yet again last quarter, and its chip-hungry carmakers aren�t exactly helping the country go places.

What does this mean?

Japan�s economy was 0.8% smaller last quarter than it was the quarter before � a much steeper drop-off than the 0.2% economists were expecting (tweet this). There�s a couple of reasons for that: rising coronavirus cases discouraged shoppers from getting out and about, while supply chain constraints kept factories from firing on all cylinders.

But this isn�t a first � or even a second � for Japan, whose economy has now shrunk for five of the last eight quarters. Now, then, the pressure�s mounting on the country�s new prime minister to get things back on track. His idea: offer households and small businesses cash handouts, in hopes it�ll encourage them to spend more. Still, economists are skeptical: the issue isn�t that the Japanese don�t have money to spend, it�s that they don�t seem particularly fussed about spending it.

Why should I care?

The bigger picture: If you can�t buy chips, make chips.
Monday�s data also showed that Japanese factory production slowed down last quarter, as manufacturers like Toyota and Honda continue to wrestle � in a padded thong, presumably � with chip shortages. Good thing, then, that the Japanese government just unveiled plans to expand the country�s chipmaking industry, with the goal of tripling the sector�s revenue by 2030.

For you personally: How about a Japanese vacation?
A newly chip-boosted manufacturing industry could work wonders on Japan�s economic growth and, by extension, its stocks. That, at a time when they�re looking relatively cheap: their forward price-to-earnings ratio � that is, their current value relative to 2022’s forecasted profits � is 30% lower than that of US stocks. That might be why Morgan Stanley thinks it�s time you head to the Land of the Rising Sun, recommending over the weekend that you swap your American stocks for Japanese ones.