NipponMarketBlog comments

Posted in: BOJ holds off new monetary easing measures See in context

With no wage inflation in sight, Abenomics is running the risk of grinding to a halt as a result of higher inflation and higher taxes. So far, that is all consumers have got from Abe:

https://nipponmarketblog.wordpress.com/2013/10/01/august-cpi-accelerates-more-pressure-on-real-wages/

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Posted in: Consumer prices at 5-year high, boosting Abe's deflation fight See in context

Higher inflation is only a positive for the economy if it is driven by higher economic activity, not just by higher input prices - which is exactly what is happening in Japan right now.

Without wage inflation, Abenomics is dead in the water: http://nipponmarketblog.wordpress.com/2013/09/25/crucial-japanese-wage-inflation-remains-elusive/

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Posted in: Cabinet ministers visit Yasukuni Shrine; Abe sends offering See in context

For a look at the political and economic impact of the strained relationship between Japan and China, see this piece:

http://nipponmarketblog.wordpress.com/2013/08/20/japans-complex-relationship-with-china/

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Posted in: Shares close 2.57% higher See in context

The government is trying to encourage companies to increase investments through tax cuts, but why would a corporate sector that already has over-capacity invest in even more fixed assets? Consumption on the other hand, is the one thing that has legs in terms of continued GDP growth, yet this is where the government wants to increase taxes....

http://nipponmarketblog.wordpress.com/2013/08/12/japanese-q2-gdp-misses-consensus-forecasts/

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Posted in: Japan business confidence up after almost 2 years See in context

There is no doubt that the Japanese economy is picking up pace, but it remains to be seen whether it is sustainable. It is also worth noting that there is only a marginal improvement in sentiment among smaller companies, and that the outlook for certain sectors for the 2nd half of this fiscal year is actually being revised down. This points to the effects of Abenomics being at this point almost exclusively driven by the weaker Yen, which mainly large exporters benefit from.

Importantly - Monetary expansion in itself is not going to be enough to in the long run, and so more detail on the Third Arrow is sorely needed. In the face of a weakening global economy (lead by China), Japan has to do something exceptional in its domestic economy to remain afloat and avoid losing control of government finances, and for that to happen, serious domestic economic reforms need to take place.

http://nipponmarketblog.wordpress.com/

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Posted in: Nikkei seen rising 51% in 2013: poll See in context

Abenomics will end up doing nothing for Japan unless structural reform is taken seriously. So far, there is little proof that this will or can happen. The true and meaningful structural reform has to happen within corporate Japan, and most of that can not be dictated by government. The corporate sector has proven itself incapable of reforming and restructuring properly and simply muddled through over the past several decades, and it seems more and more likely that only a very severe situation such as default on government debt, will finally kick off the cleansing and revival of corporate Japan.

http://nipponmarketblog.wordpress.com/

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Posted in: Abe leaves for Europe to explain 'Abenomics' at G8 summit See in context

“I will restore a strong economy. I pledge to increase the per-capita gross national income by no less than 1.5 million yen over the next ten years.”

This is really quite irresponsible for a PM to say. There is absolutely no way he can credibly make those sorts of promises. Nobody knows how the economy is going to look in ten years, and his government will be long gone by then. Sadly, this is just more of the same vacuous non-commital noise designed to calm financial markets, but ultimately there has to be some serious and credible detail behind this government's plans.

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Posted in: Nikkei enters bear market as stocks dive 6.35% See in context

With perfect market timing, you could have made 35% on the round trip in the Nikkei 225 over the past 2 months. However, I don't believe this is what Abe and Kuroda had in mind when they initiated Abenomics and QE:

http://nipponmarketblog.wordpress.com/2013/06/12/the-35-nikkei-225-round-trip-there-and-back-again/

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Posted in: Nikkei enters bear market as stocks dive 6.35% See in context

Looks like the market is giving Abenomics the thumbs down....

http://nipponmarketblog.wordpress.com/

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Posted in: U.S., Japan leading recovery in major economies: OECD See in context

Unless Abe-san and Kuroda-san come up with serious structural reform policies, Japan will not be able to pull out of its debt/deflation spiral. Unless real growth in the domestic economy can be ignited, Abenomics will fail.

Unfortunately, it seems as if the 'Third arrow' of structural reform is the weakest one, even though it is clearly the most important one. QE can not solve anything on its own. It will be like pouring water into a leaking bucket.

Something more has to happen (and soon) for Japan to achieve take-off.

http://nipponmarketblog.wordpress.com/2013/06/01/japan-has-now-reached-v1/

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Posted in: Abe's 'Third Arrow' reforms short of overhaul See in context

The third arrow in Shinzo Abe's quiver had better be a good one, although I strongly suspect it wont be enough. Historically, policy intitiatives in Japan have proven ineffective in dealing with the persistent sub-par growth and deflation issues. The reason for this is simple. Most of the issues that would need to change in order to make Japan more efficient and competitive reside in the corporate sector, and there is precious little the government can do to legislate their way to meaningful change there.

There has to first be a round of creative destruction, where weak zombie-companies are allowed to go to the wall, so that their place can be taken by stronger, leaner, and better managed companies. Until that happens, no amount of fiscal or monetary stimulus will make any real long term difference to Japan's problems. Of course, no government that wants to be re-elected, will allow such an unplesant shock to the system to happen, least of all in Japan where change is seen as undesirable at the best of times.

http://nipponmarketblog.wordpress.com/

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