JAPAN - Investors in Japan should look beyond the short-term impact of the crisis as the country will recover quickly due to its large foreign reserves, said Mark Mobius.
Franklin Templeton's emerging markets expert said although the fiscal stimulus package to kick-start the Japanese economy is set to be significantly larger than that needed after the Kobe disaster, the country has one of the largest foreign reserves in the world, second only to China at almost $1trn.
Although Japan has a large fiscal deficit, unlike the US or European countries, Mobius said most of the Japanese debt is also domestically funded.
"If there is one thing that I am confident of, it is the ability of the Japanese people to bounce back from this disaster, as evidenced by their quick recovery after the 1995 Kobe earthquake, which occurred in a more economically vibrant area."
He added: "Panic selling in the markets is a common knee-jerk reaction in times of crisis. At Templeton, we believe in looking beyond short-term events and volatility to consider the longer-term picture. Our investment philosophy instills in our managers and analysts the discipline to re-evaluate our holdings with a five-year investment horizon in mind."
However, the manager of the $16.7bn Templeton Asian Growth fund said the firm's emerging markets portfolios do not invest directly in Japan, although he said he has been visiting the country at least annually to meet with clients.
He said there are also concerns over the impact on commodity prices. Demand for iron ore or steel from affected plants in Japan is likely to decline in the aftermath of the earthquake, although this could be balanced by greater demand for raw materials in the country's rebuilding efforts.
He added: "I believe the net impact on the demand for raw materials is unlikely to be significant in the long term."
This week's edition of Professional Pensions is out now.
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