Flash Note
April 14, 2016
Japan. A complete picture of the true state of
the nation. Then, you decide.
Alex Fusté
@AlexfusteAlex
[email protected]
BoJ
Iwata BoJ. “rates may be eventually needed to be lowered to -0,7% or
perhaps to -1%”.
According to a poll, 62% of analysts surveyed anticipate a further
reduction in rates to -0.3% in 2016, with more asset purchases.
Monetary Base growing at a constant pace of +28,5% y/y.
Kuroda reaffirms willingness to ease policy, and that they will not
hesitate to implement new measures with the three dimensions of the
policy framework: Quantity, Quality and Rates).
At Columbia University, New York, BoJ Governor clarified that negative
rates boosts the effects of existing policy measures by directly pushing
down the short-end of the yield curve. By its part, the Mitsubishi UFJ
Financial Group president Nobuyuki Hirano, said that households and
businesses have become skeptical about the effectiveness of policy
measures to address the current economic problems, and added that there
is no guarantee that negative rates will encourage capex given rates have
already been low for over a decade.
Politics
PM Abe calls for G7 action on global economy, with Japan showing
leadership by proposing supplementary budget for FY16.
LDP vice president Komura calls for fastest implementation of 2016
budget and a supplementary one afterwards. Government has already
consolidated plans to formulate supplementary budget for FY 2016, with
Japan to front-load 8% of FY16 public works spending into H1 (some
¥10T out of the ¥12T budgeted)
GPIF to delay (bad) earnings report until after elections. Will be
announced on 29 July, three weeks later than usual, amid expectations of
the worst financial performance since the global financial crisis.
Markets
New ETF to make debut on the Tokyo Stock Exchange in May, focused
on stocks of companies that raise wages or expand employment and
This document has been produced by Andbank, mainly for internal distribution and professional investors. This document should not be
considered as investment advice or recommendation to buy any asset, product or strategy. References to any issuer or security, are not
intended as any recommendation to buy or sell such securities.
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Flash Note
April 14, 2016
capital spending. The BoJ has announced plans to buy ¥300B ($2,7B) of
such ETF as part of its asset purchase program.
Japan Post Bank plans to add REITs to its portfolio amid the low yields
on bonds. The banks has already set up an investment department
focused on REITs.
10-year JGB’s yield at -0,08%. Re-opened auction with a bid-to-cover at
3,9x!! (vs 3,2 in the previous one). BoJ is buying as much sovereign debt
as the government is issuing. Bid-ask spreads have widened to 0.12%
Banks
Japanese Banking Association says that the negative rate policy will
work over time by supporting consumption and investment, though it will
hurt earnings in the short run.
Bankers still call for more pro-growth policies (monetary action and
deregulation)
Activity (is not improving. Quite the contrary. Is getting worse)
March Tankan large manufacturers business conditions index +6 vs +12
in December. March Tankan large non-manufacturer +22 vs +25 in
December.
Large firm capex plans (0.9%) vs and +9.8% in FY15.
PMI Services March at 50 vs 51.2 in February.
BoJ Consumer sentiment index in Q1 falls to -22.5 (vs -17.3). Outlook
index in Q1 falls to -30.9 (vs -19.9).
Leading Composite Index lows to 99.8 in February (vs 101.8 in January).
Coincident Composite Index lows to 110.3 in February (vs 113.5 in
January). Core machinery orders (Febr) falls -9.2% m/m vs (+15% in
January
M&A slumped in Q1: -67% in transactions to acquire overseas business.
Deals in Asia dropped -88%. In Europe -68%.
Fast Retailing Group cuts FY profit guidance for second time (to ¥120B
from ¥180B).
Current Account balance raised in Febr (to ¥1.7B from ¥1.5B in Jan).
March corporate bankruptcies -13,2% (vs +4,5% in Febr)
This document has been produced by Andbank, mainly for internal distribution and professional investors. This document should not be
considered as investment advice or recommendation to buy any asset, product or strategy. References to any issuer or security, are not
intended as any recommendation to buy or sell such securities.
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Flash Note
April 14, 2016
CPI & Wages
The pace of price hikes in Japanese supermarkets has slowed
dramatically in April compared with last spring, citing its own CPINow
index, with trend growth of 0.72% as of Monday, marking the weakest in
nine months and well below its 1.2-1.4% pace in March.
CPI expectations lowered: Firms see now at +0,8% in one year (lower
than 1% seen in December). BoJ to cut forecasts in the semi-annual
outlook report from the current estimates of +0,8% in FY16, and +1,8%
in FY17.
Wages at +0,4% y/y (low growth, thought up-ticking from January)
Outlook
Olivier Blanchard (former IMF’s chief economist) reckons that Japan is
heading for a full-blown debt crisis.
Our own view? You already know it. The euthanasia of the rentier (via
negative rates) will not help to accelerate velocity of money.
Regards
This document has been produced by Andbank, mainly for internal distribution and professional investors. This document should not be
considered as investment advice or recommendation to buy any asset, product or strategy. References to any issuer or security, are not
intended as any recommendation to buy or sell such securities.
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