Why Is Depreciation In Japan So High Compared To U.S.?

In a recent series of blog posts on FT, Andrew Smithers has been arguing that CAPE isn’t reliable outside the US (and possibly the UK) because profit margins don’t revert to the mean over a reasonable period of time. He’s on his way to explaining how he thinks investors should view Japanese equities, but his most recent article hit on something pretty striking: depreciation in Japan is nearly twice as high as it is in the US.

“US depreciation amounts to 39 per cent of operating profits, while the ratio for Japan is 68 per cent,” he writes. “This might be justified if depreciation should be higher in Japan for non-financial companies in general, or because listed companies in either...