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rffrydr
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 Posted: Fri Mar 03, 2006 12:25 am Post subject: JAPAN |
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Core rate up .5%; 3 in a row:
"Mitsubishi UFJ Securities senior strategist Naomi Hasegawa said remarks this morning by Prime Minister Junichi Koizumi fueled conjecture that the central bank will soon end its present policy.
'[Changes in] consumer prices are coming in above zero and we are seeing signs of getting out of deflation,' Koizumi told a parliamentary committee.
His comments were his most positive yet on recent indications that the economy is winning its battle with falling consumer prices. Previously, Koizumi had insisted that it was too soon to say that the economy was coming out of deflation."
Bonds and stocks were short going in. End-of-day showed resiliency, (complaceny?)
Hey Henry, Devil's advocate: with Japanese debt at a Godzilla-sized 160% GDP on the worlds fastest aging population (and most afraid of foreign workers) do they have any choice BUT to reflate their way out? And politicians want a decade for "reforms."
An end to quantiative easing may be announced at the end of Japanese Fiscal Year--but this could take a long, long time to play out. Markets 1st "verdict."
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nodoodahs
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| Posted: Tue Aug 28, 2007 8:31 pm Post subject: |
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Yeah, the volatility will have to calm down so that the currency losses don't knock the carriers out of the interest spread positions. It'll be a while before it's back on in force ... but it will be back, and this cabinet move just helps assure that.
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HenryTo
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| Posted: Tue Aug 28, 2007 8:27 pm Post subject: |
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| Yes, eventually. Sentiment (local polls) showed Japanese households to be more optimistic about the current government after the reshuffle. |
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nodoodahs
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| Posted: Tue Aug 28, 2007 8:06 pm Post subject: |
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What's bad for the Japanese economy is good for the carry trade.
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HenryTo
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rffrydr
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| Posted: Thu Aug 09, 2007 7:05 am Post subject: |
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Mrs. Watanabe, the Carry Trade's champion:
| Quote: | HEADLINE: Mrs Watanabe and our man on the omnibus LONG VIEW - JOHN AUTHERS
BYLINE: By JOHN AUTHERS
BODY:
Where does the money come from? World markets have been convulsed for several weeks now as cash is pulled from risky investments.
Financial markets appear to have generated much of their cash themselves, through such adroit means as taking advantage of slight differences in interest rates in different countries, or playing the huge and growing market for credit derivatives, which allow investors to buy protection against the risk of defaults.
But much of the money traces its way back to retail investors, who are hoping one day to use it to retire.
Different cultures have different names for their heroic retail investors. The cultural cousins of Britain's "Man on the Clapham Omnibus", include "Mrs Watanabe" in Japan, and the entire city of Peoria, Illinois, in the US. All are held to be intelligent and common-sensical, but not necessarily experts. The weight of their money will eventually be felt. So what are they doing?
Mrs Watanabe finds herself at the heart of the drama over the chronically weak Japanese yen. Many blame hedge funds. On this theory, it is hedge fund managers executing a "carry trade" - borrowing in yen to put money into higher yielding currencies like the Australian and New Zealand dollars, and pocketing the difference - who have pushed the yen down.
Another theory, however, blames Mrs Watanabe. Interest rates on savings products in Japan remain minimal. Invest almost anywhere else and you will get a greater return. International returns look all the better because of the weakness of the yen: and that weakness is itself reinforced by Mrs Watanabe when she sells yen in order to buy foreign investments.
Over the last year, the FTSE World ex-Japan index is up 27 per cent, in yen terms, despite a fall of 10 per cent in the last week. By comparison, Europeans, investing in the strong euro, have much less incentive to invest overseas. In euro terms, the FTSE World ex- Europe index is up only 11 per cent over the year.
There are even signs that Mrs Watanabe is taking advantage of the recent sharp increase in the yen, as risk aversion has increased around the world. When traders are worried about risks elsewhere, they tend also to be worried about the carry trade.
But Mrs Watanabe seems to have decided to buy (or in this case, go short the yen) on the dips. According to the Tokyo Financial Exchange, Japanese retail investors had by the middle of this week put a record amount in net long positions for the dollar, euro, sterling, Australian dollar, New Zealand dollar and Canadian dollar.
This makes it harder for the "carry trade" to unwind.
Foreign fund managers testify that the launch of any fund promising a higher yield, even if it uses lower quality securities to do it, will be snapped up by Japanese retail investors.
On this reading, Mrs Watanabe is a valuable source of stability for the world financial system. But it might be unwise to expect her to stay that way. For evidence, look to Peoria,
In the bull market of the late 1990s, US retail investors were steadfast. Even as the market grew more volatile in the last few years before the tech bubble finally burst, Peoria took every downturn as an opportunity to buy more.
Huge retail demand for internet stocks pushed their prices to unsustainable levels.
But Peoria could not be relied on indefinitely. In the last three years, US retail investors appear to have lost confidence almost entirely in the US stock market, despite the ongoing very healthy returns that have been available there.
Over the 12 months to the end of June, official figures from the Investment Company Institute show that a net Dollars 4.5bn was pulled out of US equity mutual funds, while Dollars 140.7bn flowed into international equity funds. This is a recent and drastic change of behaviour. Until 2005, inflows to international funds had never exceeded flows into domestic funds in an "up" year for stock markets.
Preliminary indications are that Peoria pulled out ahead of the latest dose of stock market turbulence. Trim Tabs Research, which monitors mutual fund flows, estimates that Dollars 5.5bn flowed out of stock funds on Tuesday of last week. Retail investors never bought into this US bull market, but still seem to have taken fright earlier than others.
Why has this happened? Peoria may be reacting to the same stimuli as Mrs Watanabe - the weak dollar of the last few years makes international returns look much better. The process becomes self-reinforcing, creating bubbles in emerging markets, and pushing the dollar down.
Peoria is also unconvinced by arguments for the US. But the key point is that it would be most unwise to rely on Mrs Watanabe to keep selling the yen. She might yet take profits.
Meanwhile, what should the Man on the Clapham Omnibus do? He should probably keep his head down. Amid such volatility, there are great bargains to be found, along with some great short-term trades.
But finding them is difficult - blindingly so for the Man on the Clapham Omnibus, who is not an investment professional. As he was sensible enough to be broadly diversified when the market turbulence broke out, that is probably how he should stay.
john.authers@ft.com
LOAD-DATE: August 3, 2007 |
Letter:
| Quote: | HEADLINE: Why Mrs Watanabe is going to keep her purse shut
BYLINE: By TAKASHI ITO
BODY:
From Mr Takashi Ito.
Sir, I have enjoyed the various views expressed in your newspaper regarding Japanese interest rates (Letters, April 12, 13 and 16). I would like to focus on one of the main points of contention, namely, the impact on consumption. Basically, would Mrs Watanabe spend more money if she earned more interest income, or would she actually save more (allocate more to cash)?
I don't think Mrs Watanbe is going to go wild with her extra interest income at Mitsukoshi (the high-end department store), nor is she actively optimising her portfolio returns. She is simply thinking about the future.
She is thinking about the high indebtedness of her government (higher than any country, with the exception of Malawi and Lebanon) and the shrinking population. She is wondering about a future of higher taxes, a retirement age of 70, and deep cuts in healthcare and pensions.
The goverment must show how the future is going to be different from this gloomy but highly realistic scenario.
Until then, whether interest rates are 0 per cent or 4 per cent, she is going to keep that purse closed. |
http://futuresource.quote.com/charts/charts.jsp?s=EURJPY%20A0-FX
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rffrydr
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| Posted: Tue Aug 07, 2007 6:43 am Post subject: |
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Mauldin this week is looking where he should be, where "subprime" story has little influence but liquidity does, Ms. Wantanabe's purse.
| Quote: | Until now, Japan had been 'floated' by ASSET reflation. That has included 'Land', and thus Real Estate. Interestingly, and SO a symptom of the monetary angle on reflation, we note that Real-Estate and Land have FAR, FAR, FAR 'outperformed' the Construction and Building sectors.
The BOOM has NOT been via a supply build-out. It is defined purely as monetarily-driven asset price reflation. Whoops, there is a problem !!!! The BOOM in Land and Real-Estate, along to a lesser extent in stock market wealth ... has NOT resulted in ANY of the following effects:
Rising Domestic Consumer Spending
Expanding Monetary Base
Consumer Price Inflation
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Lots of excellent charts. But he could be making the OPPOSITE argument: for though he's looking for downside forces apart from our story to confirm our story, he's assuming down is where we're headed.
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dash
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| Posted: Wed Aug 01, 2007 11:50 pm Post subject: |
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In as much as the Yen carry trade is an important gauge of whether 'risk contagion' is spreading, it's interesting to see that Dollar/Yen hasn't tested the March low. In fact the series of higher highs, and higher lows still seems to be intact:
http://tinyurl.com/364nnb |
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HenryTo
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| Posted: Sun Jul 22, 2007 1:32 pm Post subject: |
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Yes, you're right. Japan has been relocating its manfactuaring to China in a big way since early 2003:
Here is an article discussing Japanese corporate governance and why Japan still isn't a good buy despite its stock market being the most undervalued in the developed world:
http://www.bloomberg.com/apps/news?pid=20601084&sid=ay.myHJUEl3Y&refer=stocks |
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rffrydr
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| Posted: Sat Jul 21, 2007 12:00 pm Post subject: |
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Japan has been loosing market share because that's what happens when you dismantle the Keiretsu and reinvent them... in China!
http://en.wikipedia.org/wiki/Keiretsu
Long before China became the world's factory they became Japan's.
The reason they're loosing the '05 US investors is that 1. Yen weakness 2. Their market just isn't any fun.
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HenryTo
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| Posted: Sat Jul 21, 2007 1:21 am Post subject: |
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Bank Credit Analyst on the Yen:
http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20070717.GIF
| Quote: | | In fact, Japan has been losing market share versus industrialized economies since the start of the decade, even though demand from China for Japanese capital goods has held strong. Similarly, Japan's deteriorating terms of trade are weighing on the yen. The terms of trade have declined by roughly 30% in the past five years as commodity prices have surged, and are now at a 25-year low. Notably, in the past three decades the real trade-weighted yen has not appreciated on a sustainable basis without an improvement in the terms of trade. Our upbeat view on oil prices indicates a turnaround on this front is not imminent. |
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rffrydr
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| Posted: Wed Jul 18, 2007 11:36 am Post subject: |
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When is a stock market not a stockmarket?
| Quote: | Byline: DAVID TURNER
TOKYO -- The new head of the Tokyo Stock Exchange yesterday set out plans to move away from "old-fashioned securities" to close a growing gap with more innovative exchanges such as London, Singapore and Hong Kong.
Atsushi Saito, who will succeed Taizo Nishimuro as president later this month, said the TSE should turn itself into a "financial products exchange" by offering a wide range of derivatives and "exotic products".
In his first interview with the foreign press since accepting the top job at the TSE, Mr Saito pre-dicted that "no more than three" of the world's leading stock exchanges would survive as significant global competitors.
He said it was vital for the TSE to widen its range of products and suggested his top priority would be to launch commodity index futures and a similar product based on the Japanese property market: "Unless we can plan attractive products, trading will go to London, Shanghai, Singapore, Hong Kong, New York."
Mr Saito made clear he was deeply concerned about the threat to traditional exchanges from so-called "over the counter" trading by international brokerages. "If you visit the trading rooms of Morgan Stanley, Goldman Sachs, they're trading stocks all over the world on an OTC basis," he said.
Mr Saito, who carved out a successful career at Nomura Securities in Tokyo and New York before taking charge in 2003 of the IRCJ, the state-backed turnround body for troubled Japanese companies, suggested the TSE would continue Mr Nishi-muro's strategy of seeking alliances with foreign exchanges. Mr Nishimuro's tie-ups included deals with the New York and London stock exchanges.
The new chief's plans for commodity index futures could have consequences for Japan's four struggling commodity exchanges given the TSE's size.
Mr Saito backed the Japanese government's plans to transform Tokyo into an international finance centre but warned that significant reforms would be required to make the plan work.
"Manufacturing is shifting from Japan to abroad so we have to create a new industry, a financial industry," he said. "A lot of companies that want to list will come here but, before that, we must change the service quality of our stock exchange." Only four foreign companies have listed in Tokyo since 2004.
Source Citation: Turner, David. "TSE to launch 'exotic products' to vie with other bourses.(COMPANIES INTERNATIONAL)." The Financial Times (June 2, 2007) |
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rffrydr
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HenryTo
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| Posted: Tue Jul 17, 2007 12:10 am Post subject: |
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An older article. Myron Scholes has already opened an office in Japan and is going to try to take advantage of the boom in alternative investing in Japan:
http://www.bloomberg.com/apps/news?pid=20601101&sid=aMqG1zdWd6f8&refer=japan
There is a great chapter on Myron Scholes and Platinum Grove Asset Management in Peter Bernstein's new book "Capital Ideas Evolving."
| Quote: | Scholes' Platinum Grove Asset Management, based in Rye Brook, New York, manages about $4.5 billion, he said. About 10 percent of its funds come from Japanese investors. Its Japanese arm, which has nine employees, started in Tokyo in November and was registered as a securities investment adviser in March, according to documents provided by the company.
The firm's Platinum Grove Contingent Capital Fund has an average annual return of 9.4 percent after fees, Scholes said. |
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HenryTo
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| Posted: Thu Jul 05, 2007 11:24 am Post subject: |
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Hi Geoffrey,
I would give it another week or so. Once liquidity comes back next week, you never know what it's going to do. My inclination is to only sell the Euro-Yen on a gap up, primarily because of the huge carry disadvantage that you get when you sell the Euro vs. the Yen. If you don't get the gap up, then you don't short.
Just like any other "financial dislocation" strategy, however, this should only be done as a hedge or in moderation... 
Take care,
Henry |
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Geoffrey
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| Posted: Thu Jul 05, 2007 11:02 am Post subject: |
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" The BOJ is now expected to hike rates by 0.25% to 0.75% during its August meeting"
Thanks Henry. How does selling EURJPY look to you from here? |
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