Posts tagged 'Japan'

Intended consequences and the yen

From the pen of South Korea over the weekend:

South Korea has warned that G8 leaders need to do more to tackle the “unintended consequences” of Japan’s monetary easing when they gather for a summit later this month amid mounting concerns about the knock-on effects of a weaker yen.

In an interview, Hyun Oh-seok, the South Korean finance minister and deputy prime minister, said that international co-ordinated action was needed to mitigate the impact of so-called Abenomics on currency markets.

First: “unintended consequences”? Not sure about that. It all seems very intentional from where we’re sitting. Read more

The point at which the Nikkei rot stopped?

Who knows. But we can report that this report, from Reuters, caused a sharp trend reversal in Japanese equity futures on Thursday accompanied by a sudden weakening of the Yen.

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Nikkei pain

That’s the Nikkei off 5 per cent on Thursday morning, its biggest fall since last week’s 7.3 per cent hit:

Both the Nikkei and the boader Topix have lost around 13 per cent in local currency terms since hitting peaks last week: Read more

Kuroding yields

The daily attempts of Bank of Japan and Japanese government officials to calm volatile equities/yields/yen is becoming dizzying. For Kuroda in particular it must be exhausting. The poor guy is everywhere.

Still, Tuesday’s efforts saw the Nikkei up 1.2 per cent and the yen down 1.2 per cent against the dollar and above Y120. However, Japan’s 10 and 5 year yields headed back above 0.9 per cent and 0.4 per cent respectively: Read more

For the US, it’s only a ‘lost half-decade’

John Calverley and team at Standard Chartered have a big report out looking at how a selection of developed economies are doing post-2008. The short answer is that the US has largely recovered from the crisis, with growth there likely to be above trend in 2014. The UK and Japan, meanwhile, are still behind in terms of balance sheet adjustment and effective monetary policy, while poor Spain “still has a long way to go.” Read more

Japan’s mini crash: Blame China, not just Ben

The Nikkei 225 was clearly over-cooked. But just how over-cooked, we found out on Thursday…

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A Japanese frenzy?

Yes, the rally in Japanese equities has caught many an eye. There’s been hardly a step backwards in six months.

Yet prices seem to be accelerating from here. With the Nikkei 225 already up 1.6 per cent on Wednesday, closing at 15,627. Here is the after-hours action, courtesy of the CME: Read more

BoJ maintains, but Abenomics is still hard

The Bank of Japan’s May statement on monetary policy is out, and it’s basically a big MAINTAIN on its ‘quantitative and qualitative easing’ (QQE) programme.

If anyone was anticipating the BoJ might take this opportunity to point out it is mindful of recent rises in government bond yields — and apparently some were expecting this sort of reassurance, possibly even tweaking maturities purchased — they would be disappointed. Equities traders just seemed relieved that their rally will continue.

However one member, Takahide Kiuchi, proposed the 2 per cent inflation target shift to a “medium to long term” and the new QQE plan itself be designated as “an intensive measure with a time frame of about two years”. Kiuchi’s proposal at this meeting was voted down by the other eight board members. The central bank has, however, already revealed that some members are concerned about the risks of its QQE plans hurting retail investors in Japanese government debt. Read more

Assessing Abenomics

Today in Abenomics, we saw some yen strengthening after Japan’s economy minister Akira Amari made remarks interpreted as indicating the yen had weakened enough:

“People say the excessively strong yen has corrected quite a bit. If the yen continues to weaken steadily from here, negative effects on people’s lives will emerge,” Amari told a Sunday talk show.

All very exciting and the yen strengthened accordingly, allowing us the space to take a longer look at the progress Japan’s reflation experiment has made. Read more

The risk of a Japanese VaR shock

JP Morgan’s always interesting Flows & Liquidity team have weighed in on the great Japanese yield panic. Japanese government bond yields have jumped since the Bank of Japan launched QE on steroids at the start of April and volatility has risen with them — the 60-day standard deviation of the daily changes in the 10 year JGB yield jumping to 4bp per day, the highest since 2008 (that’s longer term yields on the right for a bit of context):

That has understandably scared people who remember the volatility-induced selloff shock of 2003. From JPM: Read more

Bird, plane, Abe

One for the mantelpiece, Mr Abe:

(Click through the pic for the Economist article) Read more

Abenomics passes an early test

Japan’s economy grew at the fastest pace in a year last quarter, with solid growth in consumer spending and exports suggesting the expansionary policies of Shinzo Abe, prime minister, are delivering quick and tangible results.

Government data on Thursday showed that real gross domestic product increased by 0.9 per cent in the three months to March, or 3.5 per cent in annualised terms. It was the second consecutive quarter of growth, after a rise in October-December that the government revised upward to 1 per cent.

That’s from the FT’s Jonathan Soble.

Of course, quite a lot happened after the end of Q1 as well. Read more

The super soaraway Nikkei [updated]

Nikkei 15,000 comes courtesy of a weak yen and increasing earnings expectations which carry some potentially elevated valuations with them. If you need any evidence of how sensitive the Nikkei has become to the yen’s rise, here’s a chart to ease your suffering:

But there are other things at work here. Read more

USDJPY 100, eh?

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On the virtuous circle of exporting deflation

We thought the following from TD Securities’ Richard Gilhooly on Tuesday was a rather insightful way of looking at the whole BoJ effect (our emphasis):

While it remains a contentious point and as yet unproven, Japan’s devaluation and soaring Nikkei vs slumping DAX or Bovespa has all the hallmarks of a competitive devaluation. While competing factions debate the Monetary expansion/QQE, versus beggar-thy-neighbour interpretation, one positive aspect of the Japanese Yen collapse and fear of exported deflation has been collapsing commodity prices with weak growth in export countries (China, Germany, S Korea) and a stronger USD helping a supply story (crude inventories at 22yr highs) and weak demand send commodities into a bear market.

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The evolution of luxury markets

Now that we have Chinese socialites engaging in public cat fights over who is richer, posting snapshots of their bank accounts “Rich Kids of Instagram style“, one has to wonder if it may be worth revisiting John Hempton’s prediction last year that the Chinese authorities will finally crack down on this sort of over-the-top gratuitous wealth display, and when that happens the luxury brands — among them Swiss watches — will begin to suffer.

(*We should note the “I’m really richer than you” meme possibly applies to Prince Alwaleed bin Talal as well). Read more

Guest post: QE on steroids in Japan

This is is a guest post from Philip Pilkington, a writer and research assistant at Kingston University.

In January of this year I noted that the Japanese government was embarking on a stimulus programme and briefly enquired into whether it would likely work or not . At the time media commentary was mixed. Some were saying that it would be a complete failure while others were overflowing with optimism. I was slightly more reserved. Read more

Japan’s employers, taking up the Abenomics cause

Well, some of them at least. One of the big determinants of whether ‘Abenomics’ manages to pull Japan from its deflationary spiral is through wage growth. Inflation can’t really kick off or arguably even begin without rising wages. One can argue about how important wage growth is, or where it fits in causality-wise — and we’ll come to that later. But it is — or will be — an important signal as to whether this three-pronged approach of the new-ish Japanese government is working.

And actually, it might be catching on. Read more

We seek inflation here, we seek inflation there…

… the Japanese seek inflation everywhere.

All this talk about Japan, JGB bond yields, QE, the yen… and hardly ever does anyone throw up the following chart.

So, without further ado, here is the most important Japanese chart of all courtesy of Capital Economics… the CPI: Read more

Don’t kill the old, pander to them

“Whatever we can”, you say? Encouraging words from BoJ governor nominee Kuroda over the weekend (even if comparisons with Mr Draghi are overblown). If Cullen Roche is correct, what happens in Japan over the next year or many could change the future of economic policy. So it’s worth spending a bit more time on what Kuroda’s “can” might actually be.

We’ve argued already that much of the low-hanging fruit of expectations and verbal intervention has already been plucked. Read more

Shinzo Abe’s phaser

Gotta love a good contrarian yen call.

As we’ve written multiple times, the yen’s recent fall been based on policy which has yet to appear, namely on expectations of Abenomics. Japanese authorities have done an excellent job of short-term monetary fear-mongering, but as Gavyn Davies put it recently there is a severe risk that the international hedge funds which have been driving the decline in the yen might come to the conclusion that the emperor has no clothes. Read more

Ye olde Abenomics

All this has happened before and will happen again… at least, so hopes the Japanese government.

Current finance minister Taro Aso has been keen to channel the spirit of his 1930s equivalent Korekiyo Takahashi, whose polices are widely credited with pulling Japan out of the Showa Depression. It’s understandable. Read more

Kuroda’s BoJ nomination is go

As was widely tipped early this week, Asian Development Bank president Haruhiko Kuroda has been nominated for Bank of Japan governor, while academic Kikuo Iwata and Hiroshi Nakaso, a BoJ official, were put forward for the two deputy governor roles.

It wasn’t a big surprise: as the FT reports, the yen briefly weakened to 92.6 from 92.4 on the news, before regaining that loss. Read more

Japan trade figures, perhaps not so bad

The weaker yen hasn’t done much for Japan’s exports so far, with preliminary data out today showing another record in Japan’s trade deficit. Exports were 6.4 per cent higher, year-on-year, in January and failed to raise as much as imports (up 7.3 per cent). This brought the trade deficit to Y1.63bn.

Societe Generale say not to worry yet, however. Firstly, those figures are not seasonally-adjusted. Month-on-month seasonally-adjusted numbers show the trade deficit shrank from Y678.9bn in January from a revised Y783.8bn in December. Read more

Japanese investors, the AUD and everyone else

Japanese investors are a powerful bunch in world markets. For a microcosm of this, just look at Australia; Japan plays a big role here in debt and in turn, in currency; and it’s a market that has been very attractive to foreigners of late, keeping the currency stubbornly high regardless of price changes in the country’s key exported commodities. BUT, as with everything yen at the moment, there is a serious shift going on. Read more

Muto ado about something

It’s the latest in Japanese swings and roundabouts, pushing the yen higher and JGB yields and stocks lower… What to blame? What to blame?

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All’s fair in love and currency wars

Japan’s Masaaki Shirakawa gave notice on Tuesday that he would be leaving his post as governor of the Japanese central bank on March 19, three weeks earlier than slated.

Can we blame Shirakawa? His departure now coincides with that of two deputy BoJ governors who would be replaced by Abe-nominations (we resisted the urge to go for ‘Abominations’; it wasn’t easy.).

If Shirakawa had stuck around he presumably would have found himself the head of an increasingly mutinous court. Read more

Great, and not so great, inflation expectations in Japan

We have to admit we found a point made by Nomura’s Richard Koo last month a little confusing. He argued quite persuasively that deflation is simply not a serious problem for the Japanese today.

JP Morgan’s chief Japan economist Masaaki Kanno weighed in on the rather odd dichotomy in the FT on Monday, arguing that:

The key to understanding the success of Abenomics is the asymmetric response between the currency and the bond markets, which can be attributable to divergent inflation expectations. In the currency market, inflationary expectations rose among investors, mostly non-Japanese, while on the other hand the JGB market remains dominated by Japanese investors, whose inflation expectations appear more or less unchanged.

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Japan 2.0 (and that’s a target, mind)

Remember how Richard Koo was saying last week that inflationary expectations are actually far more widespread in Japan these days than deflationary expectations? And people fear inflation more than deflation?

We found that idea a bit surprising (and we recommend Krugman for more on the issue) but HSBC made a good argument as to why the concentration on inflation is itself a very legitimate concern. And the idea that recent weakness in the yen might in fact reflect a fear that the BoJ/ MoF will fail to control inflation once it has been loosed (our emphasis): Read more

Has BoJ policy changed THAT much?

Are the BoJ’s newly-announced measures really that dramatic?

For all Shinzo Abe’s talk of urgency in meeting the new 2 per cent inflation target, the BoJ itself doesn’t actually expect it to happen that quickly. In the forecasts accompanying today’s statement, the BoJ has maintained the 2013 CPI forecast of 0.4 per cent made back in October — which is probably fair enough as the open-ended programme doesn’t actually start until next year — and only moved its 2014 up to 0.9 per cent from 0.8 per cent. Read more