David Fuller and Eoin Treacy's Comment of the Day
Category - Japan

    Japan's Nikkei Hit 29-Year High as Buyers Look Past U.S. Vote

    This article by Shoko Oda and Komaki Ito for Bloomberg may be of interest to subscribers. Here is a section:

     

    Despite the American election turmoil, both of Japan’s major stock gauges posted their best weekly gains since May. “Since 1980s, if you look at U.S. Presidential election and stocks, you see that stocks will price in any risks before the election, like we saw in September and October when technology stocks corrected,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “Once the election is over, there’s a trend for equities to rise with expectations for the next administration.”

    Fujito sees a chance for the Nikkei 225 to reach 25,000, as central banks globally eye additional easing measures to stimulate economies. The Federal Reserve left its rates in hold Thursday but opened the door to a possible shift in its bond purchases in coming months, saying that more fiscal and monetary support are needed amid rising Covid-19 infections.

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    What to Watch in Commodities: Buffett, OPEC, Gold, Fed, La Nina

    This article by Grant Smith, Anatoly Medetsky and Stephen Stapczynski for Bloomberg may be of interest to subscribers. Here is a section:

    Less than a month after making waves with news of a move into Barrick Gold Corp., Buffett is again rocking the world of commodities. This time, Berkshire Hathaway disclosed stakes in five Japanese trading companies that dominate the nation’s energy and raw materials industries. The quintet are Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp.

    Berkshire’s stakes amount to a little more than 5%, but Buffett made clear that they could be increased. The trading houses are known as “sogo shosha” and have roots dating back hundreds of years. While they operate in areas like textiles and machinery, they derive much of their revenue from energy, metals and other commodities, supplying resource-poor Japan with essentials.
     

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    BOJ Is Said to See No Change in Policy Stance as Abe Quits

    This article by Toru Fujioka for Bloomberg may be of interest to subscribers. Here is a section:

    While the announcement of Abe’s resignation caused the yen to gain as much as 1% in the evening in Tokyo, the BOJ will continue to closely watch market developments, according to the people. The bank maintains its pledge that it will act without hesitation if necessary, the people said.

    With the economy still healing from the biggest contraction in the post war era in the second quarter, an excessively strong yen will put pressure on the central bank to act if sustained. Abe came to power in 2012 pledging aggressive monetary easing and handpicked Kuroda to deliver it. Kuroda soon launched the “shock and awe” monetary bazooka, which increased asset purchases, leading the BOJ’s balance sheet to swell significantly larger than its global peers.

    BOJ watchers will be closely monitoring who will replace Abe, because Kuroda is seen to have coordinated well with the government under the premier. The latest symbolic move was a joint statement between Kuroda and the government as the pandemic battered the economy.

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    Global Macro Outlook: Virus curve flattening, markets stabilizing, slow recovery

    Thanks to a subscriber for this report from Deutsch Bank by Torsten Slok. It is loaded with thought provoking charts which may be of interest.

    Japan Inc.'s Cash Stash Grew to 89% of GDP Before Emergency

    This article by Yoshiaki Nohara for Bloomberg may be of interest to subscribers. Here is a section:

    Corporate retained earnings rose to ¥484 trillion, roughly 89% of the nation’s gross domestic product (GDP) in the three months to the end of March, according to finance ministry data published today.

    The extent to which firms tap into this cash hoard will likely be in the spotlight again as the current crisis unfolds, especially for companies that lay off workers.

    Policymakers have been doubling down on their support for the economy. Since Abe called a national emergency in early April, his government has put together record stimulus packages worth ¥234 trillion or about 43% of GDP. The Bank of Japan’s special measures total ¥75 trillion.

    With Covid-19 threatening jobs and businesses, economy minister Yasutoshi Nishimura in March urged companies to spend their cash savings to cope with the pandemic.

    Japanese firms have taken a more cautious stance on spending their income since the global financial crisis with many of them looking to shore up their finances in case of future economic shocks. This conservative stance has drawn criticism from policymakers, namely finance minister Taro Aso, as not being aggressive enough to boost growth through higher wages and investment.

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    Email of the day on Japanese stocks and 6G:

    I hope you and the family are handling the new normal? You certainly seem to, as there has been no decline in your daily's, in fact if anything they are like a good wine, getting better with age/experience.

    I have recently checked all the Topix industrial indexes. Virtually all of them look like the majority of most world stock market indexes, except for two,

    The Topix Telecommunication Index and the Topix Pharmaceutical Index.

    They both compare more to the NASDAQ and one or two other stronger US indexes.

    If you remember, late last year I sent you a list of Japanese 5G related companies, some of these are what my portfolio has consisted of most of this year. Many are performing in line with the NASDAQ, but when markets were selling off during March and April I added KDDI and DOCOMO to my list. I came across a DOCOMO white paper confirming their research into 6G!

    Unfortunately, I do not have very much experience of the Pharma sector, except for the big names. So, if your collective could offer any ideas it would be much appreciated.

    Thanking you in advance.

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    Japan Stocks Rise on Optimism Over Restart of Economic Activity

    This article by Min Jeong Lee and Ayaka Maki for Bloomberg may be of interest to subscribers. Here is a section:

    “We can’t let our guards down, but the numbers of new infection cases are falling, allowing people to formulate some sort of outlook, which is being welcomed by the market,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. “The market is moving based on a scenario that the June quarter will be a bottom for the economy, followed by a recovery from the September quarter.”

    Optimism that economic stimulus measures will help cushion the blow from the virus also buoyed sentiment. The government and the ruling party aim to finalize plans for a second supplementary budget for fiscal 2020 during the current Diet session, the Yomiuri reported.

    “The 2 trillion yen being touted is sizable and the government is taking action faster than expected,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute.

     

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    Bank of Japan Looks to Highlight Fiscal-Monetary Double Punch

    This article by Toru Fujioka and Sumio Ito for Bloomberg may be of interest to subscribers. Here is a section:

    “If you look at what we’re doing from the size of our balance sheet against GDP to our measures compared to the size of the commercial paper and corporate bond markets, the scale of the Bank of Japan’s easing is far larger than any other central bank,” Kuroda said at the briefing.

    And

    “Impressions matter in this kind of crisis. While the BOJ’s balance sheet is, of course, much bigger than its peers, the response to this kind of crisis is very important. If you look at that, the BOJ hasn’t been as aggressive compared with the Fed,” said Masamichi Adachi, chief Japan economist at UBS Securities and a former BOJ official.

    The additional measures announced by Kuroda’s board do show a greater degree of fiscal-monetary policy coordination, with Prime Minister Shinzo Abe’s administration finally submitting an extra budget Monday for its stimulus of more than $1 trillion.

    “The government and the Bank of Japan are truly strengthening policy coordination,” said Japan’s economy minister, Yasutoshi Nishimura, following his attendance at the BOJ decision.

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    Covid-19 and Global Dollar Funding

    Thanks to a subscriber for this edition of Zoltan Pozsar and James Sweeney’s report for Credit Suisse on the plumbing of the global financial sector. Here is a section:

    Japan Limits Large Gatherings to Thwart Coronavirus

    This article by Alastair Gale for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Masahiro Kami, an infectious diseases expert, said he was skeptical that the suspension of some public events would have a significant impact on the spread of the virus. “Commuting on a packed train, for instance, is way worse than taking part in the Tokyo marathon,” he said.

    Dr. Kami, who heads a nonprofit organization called the Medical Governance Research Institute, said a media focus on the few cases of serious illness from coronavirus infection in Japan had created a panic over the need to cancel events.

    While Japan initially had a handful of cases involving people who had come from Wuhan, the center of the epidemic in China, or had direct contact with someone from Wuhan, a surge of cases in the past week included many whose path of infection wasn’t clear. The cases span from Hokkaido in the north to Okinawa in the far south.

    More than 1,000 people disembarked from the Diamond Princess cruise ship between Wednesday and Friday, and they entered Japan without restrictions on their movements. All of those passengers tested negative for the virus, but in some cases people have tested positive after a negative test—including two cases reported Friday in Australia, which sent a flight to Japan to repatriate citizens who had been on the ship.

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