From the category archives:

Japan

Japan Equity Market: Strong Asian Growth and Currency Strength

5 March 2010

Major Points: Exports to Asia recovering rapidly; Exports to Asia recovering rapidly; Yen does not follow the renminbi higher; Exports of electronic components, autos, auto parts surging; Companies that are big beneficiaries of Asia demand include electronic component and electronic material manufacturers; We recommend Nidec and TDK among electronic component makers, Aisin Seiki among auto parts makers, and Nissan Motor and Suzuki Motor among automakers.

Bank of Japan to Consider More Easing Measures

5 March 2010

According to the Nikkei, the Bank of Japan began consideration of additional monetary easing steps. Specifically, in the current framework of new fund-supplying market operations introduced at the emergency meeting on December 1, 2009 (providing up to ¥10tn in three-month funding at a fixed rate of 0.1%), the Bank is likely to explore options including: 1) extending the lending period from three months to six months and 2) increasing the total supply above ¥10tn. Even if the BoJ goes ahead with the reported steps, we believe the effects on the economy and prices will be highly limited.

Japan February 2010 Domestic Auto Sales

4 March 2010

Overall February domestic auto sales (includes minivehicles) climbed 20.4% YoY to 458,228 units, marking the sixth consecutive month of growth. New registered vehicle sales (excludes minivehicles) increased 35.1% to 294,887 units, up for the seventh straight month. Minivehicle sales edged up 0.6% to 163,341 units, marking the second monthly increase in a row.

Japan: Fiscal Risk Behind Stable Long Term Interest Rates

4 March 2010

Japanese long term interest rates have remained stable at low levels although a fiscal risk premium has probably been mounting since September 2009. In this backdrop, the government revealed its provisional calculations on the future path of public finance last month. The government estimation shows that the goal of restoring fiscal health is achievable. But the government did not include any of the upcoming policies proposed in the DPJ manifesto. If these are included and our nominal growth projections are used, the ratio of government debt to nominal GDP will not only fail to stabilize in the mid-2010s but surge to 200% in fiscal 2019.

Japan: Manufacturing Profitability Improved Faster Than Expected

4 March 2010

The recurring profits to sales ratio (profit margin) at manufacturers (companies of all sizes) rose to 3.5% in the fourth quarter of 2009 after 1.6% in the third quarter and negative 0.2% in the second quarter. The speed of improvement has been faster than our expectation. Empirically, in the manufacturing sector, when this profitability indicator returns to 4%, we have seen (1) the business confidence DI in the Bank of Japan’s Tankan survey going back to near zero and (2) labor costs starting to increase year-on-year from no change. Thus, the key focus lies when the indicator actually returns to 4%.

Japan Equity Market: Japanese Stocks Rise When Global Monetary Policy Tightens

3 March 2010

When US interest rates rise, more often than not so do Japanese stocks (since 1980). Global interest rates are generally hiked when the economy is performing well. Given their sensitivity to the global economy, it is natural that Japanese stocks rise when the outlook is improving.

Japan: What Household Income Growth?

2 March 2010

Economic activity continues to pick up, but the positive spillover from rising economic activity to household income will likely be delayed further. But the time-lag between a turnaround in nominal GDP and that in total employment income will probably be somewhat shorter this time than in the previous recovery (starting in early 2002).

Japan Drivers: What Works and What Matters (March 2010)

2 March 2010

In this report, we look at factor performances, within each sector and in Japan as a whole, the latter on an unrestricted and sector neutral basis. This allows us to strip out sector effects and determine the underlying drivers of outperformance in Japan and Japanese sectors.

Japan: Labor Conditions Improve but Consumer Spending Loses Steam

2 March 2010

January labor data: Jobless rate saw back-to-back declines while job-offers-to-seekers ratio rose for the first time in four months; January household survey: Signs of slowdown in consumer spending

Japan Portfolio Strategist: Japanese Equities as Global Cyclicals (March 2010)

2 March 2010

When global interest rates rise, so do Japanese equities; The overall Japanese equity weighting of consumer cyclicals (autos, consumer electronics, etc.) and industrials (machinery, trading companies, etc.) is around 40%, roughly twice that in Europe and the US; January 2010 Japan exports were up 40.9%, and Asian exports, which account for 55.5% of the total, were particularly strong, rising 68.1%; We forecast that the Chinese renminbi will rise from the second half of the year.

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