Today’s official resignation of Japan’s PM Shinzo Abe ended weeks of speculation following a number of hospital visits over the past month (…) The two front runners for Prime Minister are probably Shigeru Ishiba (photo) and Fumio Kishida. While neither would be likely be politically revolutionary, Ishiba has been more critical of Abe in the past and was recently quoted saying: “We need to rethink everything about Japan… Stocks are not the whole economy. We need to change the system where all wealth accumulates with stockholders and people who manage companies.” Given his more populist stance it is unsurprising that he is popular, regularly topping public polls for the preferred next PM. Kishida by contrast has been moulded and promoted by Abe himself, and never will the cliché above be more true than if he is chosen to take over from his political mentor.
Monetary and fiscal stimulus policies have failed to reactivate consumer confidence in Japan and it declined into a light, but cronic deflation of 0.3% in 2016.
Guntram B. Wolff via Caixin | G-20 ministers in Shanghai appeared to be aware of the importance of structural work. In particular, there was agreement in our panel discussions that the Base Erosion and Profit Shifting (BEPS) project of the OECD was an essential element to deal with tax avoidance and ensure that profits are taxed where economic activity generating it takes place.
TOKYO | By Nobumasa Akiyama Via Caixin | Deeds not words will determine whether Shinzo Abe will be a success in 2015, a year full of challenges.
MADRID | The Corner | The Japanese government approved last Saturday a new stimulus program to inject up to ¥3.5 billion (€23.8 billion or $29.1 billion), which will help the less developed regions of Japan and the households with subsidies, vouchers for goods and other similar measures. The government of Japan expect this new stimuli plan to boost the GDP by 0.7%. Despite the many critics to the so-called Abenomics program, the measures are still on-going as the advisor to the new government William H. Saito explained in an interview for The Corner.
LONDON | Barclays analysts | The post-election challenge for Abenomics will be how to promote a transition from a favourable turn in expectations to the real economy (real GDP). For example, JPY depreciation has boosted earnings and led to an improvement in business sentiment (expectations), but export volume remains sluggish, suggesting it has not given a boost to the real economy (real GDP).
MADRID | The Corner | The Japanese economy unexpectedly entered recession in the third quarter, just after the GDP decreased by an annualised pace of 1.6 per cent, versus forecasts that it would rebound by 2.2 per cent. Japan contracted by 0.4% in the 3Q14, leaving the country in a technical recession, which drove the Nikkei to near 3% losses and raised serious questions about the planned sales tax hike next year.
BEIJING | By Li Junjie via Caixin | Those who study the overseas investments of Chinese enterprises are starting to get jitters. Japanese companies went on a foreign real estate buying spree in the 1980s that ended in serious losses, and the question now is whether China will repeat the same mistake.
LONDON | The Corner | Emerging market equities no longer hold the attractions they did earlier in the year, according to Barclays analysts. They had previously recommended an overweight stance and now they’re cutting to neutral. In the same time they are raising exposure to Japan.
MADRID | The Corner | A bull market. But how sustainable? Asia ex Japan has just breached its 2011 high. Key to this is China. Over the last month MSCI China is up 7% on strong volume. It is now up 5% for the year. Easier monetary conditions, better growth data and improved earnings, meeting low valuations and poor sentiment, have driven the China rally and recent outperformance.