ECB bazooka a water pistol for emerging markets 23 Jan 2015 Between Mario Draghi’s bond-buying plan and the Bank of Japan’s ongoing splurge, central banks are pumping out $1.5 trillion a year in cheap money. The surprise should boost emerging markets wary of rising rates. But fading growth and falling prices will overwhelm the stimulus.
BOJ credibility frayed by oil and Swiss surprise 21 Jan 2015 The Bank of Japan has cast doubt on its inflation goal by slashing forecasts. Its Swiss counterpart’s u-turn has devalued central bank promises. To regain authority the BOJ will have to fire more bullets from a depleting arsenal. It will be heavy going if cheap oil damps wages.
Asian conglomerates lose plot in $10bln CITIC deal 20 Jan 2015 That’s what Japan’s Itochu and Thailand’s CP Group are spending to buy 20 pct of the state-controlled Chinese giant. Only then will the three decide how they can work together to create value. The back-to-front deal allows CITIC to tick a “reform” box while giving up very little.
Japan index: BOJ easing fails to score quick gains 16 Jan 2015 The Breakingviews Abenomics Index fell in November. Inflation expectations slid and wages declined. While the Bank of Japan’s Oct. 31 decision to print more money has caused stock and bond prices to zoom, the economy is still struggling to cope with an extended demand slump.
Portfolio shifts may give Japan stocks extra zing 13 Jan 2015 Local investors are buying more equities as government bonds vanish into the central bank’s vaults. A similar debt-to-stock switch boosted the market between 2003 and 2007. A repeat could extend the foreigner-driven rally that began when Shinzo Abe became prime minister in 2012.
Japan’s cash helicopter may be first to take off 2 Jan 2015 Quantitative easing is reaching its limits, but 2 percent inflation remains a distant goal. The Bank of Japan’s next step might be the ultimate stimulus: a cash gift to households. A “helicopter drop” would open a new front in the global fight against deflationary stagnation.
Kim Jong Un could succeed where Dan Loeb failed 23 Dec 2014 While it’s unlikely the North Korean leader wants to become a new kind of activist investor – despite the generous compensation – the hacking of Sony reignites the issue of whether the Japanese conglomerate should spin off its entertainment unit as Loeb’s Third Point suggested.
Goodbye tech conglomerates, hello "ecosystems" 19 Dec 2014 Companies have been using that word to justify building internet-based empires out of a mish-mash of assets with hard-to-identify synergies. Asian players like China’s Alibaba and Japan’s Softbank are amongst biggest fans of this unhelpful jargon.
Abe wins election, but wage trial will be tougher 15 Dec 2014 The ruling party’s solid election victory has renewed the Japanese prime minister’s mandate to lift wages and end deflation. Pay hikes now depend on better productivity, or the promise of it. That will not materialize quickly.
Japan index: Shallow recovery from deep recession 9 Dec 2014 The Breakingviews Abenomics Index rose marginally in October. Private consumption improved, and the stock market zoomed ahead of Bank of Japan’s stimulus. But subdued inflation is a worry. The economy could be slow to shrug off the chilling effect of the April sales tax increase.
Big Abe win will rekindle hope in Japan reforms 5 Dec 2014 Surveys predict a landslide victory for the prime minister’s ruling alliance in Dec. 14 elections. A strong popular mandate would weaken challenges from inside the Liberal Democratic Party, and embolden Shinzo Abe to pursue his anti-deflation campaign with renewed vigour.
Japanese drugmaker strikes yet another costly deal 2 Dec 2014 Otsuka’s $3.5 bln purchase of Avanir prolongs a track record of overpriced M&A for Japan’s pharmaceutical firms. Granted, the company needs new offerings before the patent expires next year on its blockbuster schizophrenia drug. But this transaction smacks of desperation.
Japan downgrade out of step with new QE world 1 Dec 2014 By normal debt logic, Moody’s is right to lower the rating of a sovereign struggling to cut its huge deficit. But yields keep falling as the central bank effectively monetises. The lesson: money-printing governments can always dodge default – and they may duck inflation too.
Faulty air bags puncture Takata financial cushion 27 Nov 2014 The Japanese group has set aside $660 mln to replace car parts linked to at least five deaths. Regulatory demands for a US-wide recall could double the bill. Lawsuits and fines will mean more pain. Takata’s survival may depend on the support of its customers – or the government.
How to make Japan’s tax timetable more credible 19 Nov 2014 Prime Minister Shinzo Abe is seeking a fresh political mandate to delay next year’s planned increase in the sales tax by 18 months. But fragile demand means investors will be sceptical of the new schedule. A better strategy would be to link the tax hike to growth in real wages.
Fragile demand syndrome isn’t Japan-only 18 Nov 2014 The sharp demand slowdown after a small tax increase shows how sensitive consumption in ageing and rich countries can be. Japan’s lack of immigrants makes it especially vulnerable, but Europe and the U.S. are not exempt. Demand stimulus will always be on the agenda.
Japan’s surprise recession clouds fiscal future 17 Nov 2014 A modestly higher sales tax has dragged down GDP for a second quarter. Fragile demand not only scuppers plans to hike the levy again next year, but may deter politicians from any future increases. Hopes of reducing the government’s huge debt load are a fast-receding dream.
Japan index: Tightening the purse strings 12 Nov 2014 Unexpected growth in manufacturing output helped our alternative economic index to a new high in September. But it wasn’t enough to lift consumers: stagnant wages and higher sales taxes left spending in the doldrums. No wonder the central bank decided to ramp up bond purchases.
Japan’s banks may swap old nemesis for new foe 7 Nov 2014 The central bank’s bond-buying spree will relieve lenders of the burden of financing an overextended government. But if companies don’t invest, lenders may use cheap cash to stoke bubbles in stocks and property. Japanese banks may start living more dangerously than before.
Bank of Japan bond vault may resemble a black hole 5 Nov 2014 The central bank will suck more than 7 percent of outstanding government bonds into its gravitational pull next year. The longer this goes on, the stronger the investors’ belief that they will never see that debt again. Any dent in that confidence could be highly upsetting.