Two milestones were passed in stock markets this week. The yield on British ordinary shares fell to the lowest level since World War One. At 234 per cent, shares in London now yield less than at the time of the stock market peaks in 1972 and 1987. If ever warning notes should be sounding, now seems to be the time.

The seemingly inexorable advance of the UK market gave rise also to the second major event as its value overtook that of Japan's. We now have shares worth more than those in the world's second largest economy.

The Japanese stock market has been a little steadier recently. But prices are still significantly below the levels reached at the end of the 1980s, when the Tokyo market was even - briefly - valued at more than Wall Street.

The timing for Tokyo could not be worse. Next week sees the start of financial deregulation in Japan. Inevitably this process has earned the title "Big Bang". This is misleading in so far as it applies to the measures to be introduced on 1 April.

But 1 April is just a start. Reforms are planned which will take three years or so to complete, so it will be some time before their efficacy or otherwise is determined. Still, next week is a start, with foreign exchange controls removed and the liberalisation of stock broking commissions.

Action needed to be taken. Share prices languish at less than half their peak in the late 1980s. One of the big four broking houses, Yamaichi, has collapsed - as has life assurance Nissan Mutual and one of Japan's top banks.

However, the Americans clearly view Japan as an opportunity rather than a threat at present. Fidelity has commenced selling financial products there, while Merrill Lynch has snapped up many of the brokers laid off by Yamaichi. Japan, after all, has the same problem as the rest of us. An ageing population that will need personal savings to fund retirement.

Unfortunately, the returns achieved by personal savers in Japan has been distinctly underwhelming. It is not just that the economy is in poor shape. Capital markets look archaic when compared with the West, while bond yields have been all but invisible - not just because of deflation either. Investors and savers have taken a back seat while the demands of industry for cheap funding are met. But all this looks set to change.

Among the more interesting announcements that have preceded next week's changes was the decision of leading Japanese pension provider, Nempuku, to outsource the management of half its funds to foreign advisers. This could be the way ahead for similar operations. Mrs Watanabe is no longer the force she was. The percentage of shares owned by individuals has dropped from over half 40 years ago to barely a fifth today. In this regard Japan is no different to ourselves, but they lack the investment management skills present in London and New York.

Whether this will presage a return to favour for Japanese shares is anyone's guess. Our own Far Eastern experts are still counselling caution. But I am mindful that our own "Big Bang" ushered in a period of immense prosperity for the domestic market. The trouble with the Japanese, though, is that they are too damned inscrutable.

Brian Tora is chairman of the investment strategy committee at Greig Middleton.

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