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

    Japan-South Korea Feud Boils Over Amid Trade Actions, Protests

    This article by Isabel Reynolds and Sam Kim for Bloomberg may be of interest to subscribers. Here is a section:

    South Korean President Moon Jae-in called Japan “reckless” in a national address Friday and his country planned to cross its neighbor off a preferred-trade list. The move came hours after Japanese Prime Minister Shinzo Abe’s cabinet removed South Korea from its list of trusted export destinations.

    U.S. Secretary of State Michael Pompeo met his counterparts from both countries Friday, but the dispute, which simmered for months as the Trump administration sat on the sidelines, looks set to worsen amid protests, boycotts and economic warnings. “By bringing economic sanctions, they’ve really escalated it to another level,” said Robert Dujarric, director of the Institute of Contemporary Asian Studies, Temple University, Japan. “This isn’t going to make South Korea cave in. If anything, it heightens South Korean nationalism. It makes it harder to de-escalate and harder to have a ‘united front’
    against China.”

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    Kuroda Says Stronger Yen Could Force BOJ's Hand on Stimulus

    This article by Henry Hoenig for Bloomberg may be of interest to subscribers. Here it is in full:

    In a rare explicit coupling of policy and the yen, Governor Haruhiko Kuroda said the Bank of Japan would have to consider additional stimulus if the exchange rate affected Japan’s inflation and economy.

    He was responding to a lawmaker’s question about the BOJ’s options if the yen rose further. The yen fell afterward, trading at 110.70 versus the dollar at 1:29 p.m. in Tokyo.

    Former BOJ officials have warned in recent weeks of more yen strength, saying there would be little the BOJ could do about it.

    Speaking to parliament on Tuesday, Kuroda said the BOJ’s options included lowering bond yields and increasing asset purchases. He told lawmakers that currency manipulation isn’t a goal of BOJ policy, but Japan’s trading partners might not be convinced if the BOJ does act to offset a stronger yen.

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    Japan's Inflation Stalls at 1% as Risks to Price Gains Gather

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

    Slow but steady improvement in Japan’s core inflation gauge has come to a halt as a host of forces gather that could see price gains begin to slow.

    Consumer prices excluding fresh food rose 1 percent in October from a year earlier, as expected by economists. That’s just half way to the Bank of Japan’s 2 percent target with the prospect of falling energy costs and lower charges from mobile-phone carriers pointing to weaker price growth ahead.

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    Japan's Record Shorts Hint Stocks Have Finally Bottomed

    This trading note from Bloomberg may be of interest to subscribers. Here it is in full:

    Japanese stocks may have finally bottomed after the ratio of short bets on shares trading on the Tokyo Stock Exchange climbed to a record high. Spikes in bearish bets indicate extreme pessimism and can lead to a short squeeze if stocks rebound, driving up prices further. When the ratio reached near current levels in March, it marked the start of a 9 percent rally over the next two months for the Topix index. The gauge has since lost all those gains and is trading near a one-year low amid growing concerns over upcoming corporate earnings and a slowdown in China’s economy.

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    Email of the day on Japan

    Greetings from Japan. You have observed that this country seems to be opening up to foreign workers to offset its demographic decline. Indeed, most restaurants and convenience stores employ Asians nowadays. However, as you know, Japan is an insular, monocultural country and there is a great deal of resistance to immigration. Having lived here for over 30 years I'm convinced that the cultural shock of absorbing huge numbers of foreign workers will be too much for Japanese society. I'm therefore encouraged to hear that the government intends to be very selective over which countries' nationals it intends to accept. Those which refuse to take back their nationals if Japan wishes to expel them will not be considered, Iran being one example cited. Hopefully, this indicates that the government has taken the abject lessons of Europe on board and will be stringently selective, including cultural and religious factors in deciding their eligibility. You have also mentioned that immigrants will boost the economy through their spending. I doubt this, as many will be low-skill workers who will be intent on sending as much of their earnings as possible back home rather than on buying furnishings and goods for their small, rented accommodations.

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    Trump Is Looking for Quick Fix in Japan Talks, Abe Ally Says

    This article by Connor Cislo and Emi Urabe for Bloomberg may be of interest to subscribers. Here is a section:

    Abe and Trump agreed to open limited bilateral trade talks. Japan had resisted U.S. efforts at a more comprehensive bilateral trade deal, saying it preferred that the U.S. return to the TPP.

    The two leaders agreed to work to increase car production and auto-related jobs in the U.S., and that Japan wouldn’t be pressed to offer better access to its agricultural markets than it did under the original TPP. Trump also agreed not to place tariffs on imports of Japanese cars while the talks are taking place. The talks, limited to trade in goods, are aimed at seeking to "produce early achievements," according to a joint statement released by the White House.

    Amari also said Trump’s focus on selling autos in Japan is misplaced, noting that Japan does not levy tariffs on auto imports, unlike the U.S. He said Japanese consumers simply don’t want American cars, making talks on the subject "pointless."

    As Trump takes on China’s trade practices, it’s still possible that he brings the U.S. back to the TPP, given that it addresses many of the U.S. concerns -- such intellectual property theft, forced technology transfers and state-owned enterprises, Amari said.

    "But that’s just my modest hope," he said. "I’d put the odds at less than 50 percent."

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    Best Week in Two Years Leaves Japan Stock Bulls Feeling Redeemed

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

    A deeply-rooted “misperception” that the Japanese economy will give way to deflation and lead to an eventual collapse of local equities has been a drag, keeping investors blind to positive developments, according to Musha. Most recently, belief that Japan will be crushed in the escalating trade conflict between the U.S. and China has propelled bearish views, he said.

    Japan’s economy grew at the fastest pace in more than two years during the second quarter, as companies cranked up capital spending to meet global demand and cope with a severe labor shortage. Growth is expected to slow during the second half but remain steady well into 2019, when a sales-tax increase slated for October will pose a challenge to consumers.

    The better than expected 11 percent jump in July core machinery orders helped highlight that robust capital expenditure is Japan’s driving growth, according to Jonathan Allum, a strategist at SMBC Nikko Capital Markets Ltd. In London. This is one factor that stock bears may have been missing and could prove to be a catalyst for a rebound, he said.

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