Things down at the Bank of Japan are hardly calm these days. On one version of events (see yesterdays Tankan) Japan is about - finally - to emerge from deflation, and the BoJ naturally enough wants to 'normalise' monetary policy. The politicians however are non-too clear about this:
"Japan’s ruling Liberal Democratic party will on Thursday urge the Bank of Japan to tie its monetary policy to nominal gross domestic product in an effort to lock in the central bank’s ultra-loose monetary stance for as long as possible."
"The proposal, which marks an escalation in tension between Japan’s politicians and the independent central bank, aims to stimulate above-trend economic growth for up to five years."
Japan Real Time Charts and Data
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Japan related comment. He also maintains a collection of constantly updated Japan data charts with short updates on a Storify dedicated page Is Japan Once More Back in Deflation?
Tuesday, December 20, 2005
Friday, December 09, 2005
Japanese Third Quarter Growth
Well here it is, all coming home to daddy. The Japanese data I mean. Third quarter annual growth in Japan has just been revised down from 1.7 to 1%. This is coming home to daddy, since I continue to believe that - for demographic reasons - we will not see a self-sustaining Japanese recovery. Japan will continue to be dependent for growth on China, the US and Europe. Hence weaker than expected data should hardly be surprising.
Gross domestic product was up only 0.2 per cent on the quarter in real terms, with an annualised rate of 1 per cent. The new figures show that growth has been slower than expected, and significantly lags behind the pace in the first half of the year. The government had previously estimated quarterly growth of 0.4 per cent in the three months to September and 1.7 per cent growth on an annualised basis.
Gross domestic product was up only 0.2 per cent on the quarter in real terms, with an annualised rate of 1 per cent. The new figures show that growth has been slower than expected, and significantly lags behind the pace in the first half of the year. The government had previously estimated quarterly growth of 0.4 per cent in the three months to September and 1.7 per cent growth on an annualised basis.
Monday, December 05, 2005
Japan and the US Yield Curve
Understand why the US yield curve may be about to invert and you've understood a lot IMHO.
Brad Setser picks up on the FTs Steve Johnson, and earlier here.
Johnson makes one extremely revealing point:
"The chief problem for the yen is that the flattening of the US yield curve has made it uneconomical for Japanese investors to hedge their ongoing purchases of US Treasuries, but a falling yen encourages overseas investors to hedge their purchases of Japanese equities - negating the value of these latter flows in currency terms."
Obviously what we have is asymmetric hedging. This begins to solve what had long been a mystery for me: who was really buying into the sustained Japanese recovery argument. Obviously many of the Japanese themselves aren't (sensible them). But OPEC members are. Really they should sack all their financial consultants :). The big issue, of course, is the US yield curve. The chain normally cracks at its weakest point, so this is a must to watch. Also, I wonder how much asymmetric hedging is taking place in Germany?
Basically the growth imbalance between the US, Germany and Japan, and the inability of these latter two economies to 'normalise' interest rates is producing a significant distortion in the global financial system. The US can have interest rates in the 4 to 5% range and still grow faster than either of the other two.
Co-indidentally cross this with a petro-dollar surplus arising from the changing terms of trade, and you have all the ingredients for some kind of problem. Now let's wait and see what happens next. I'm fascinated.
Brad Setser picks up on the FTs Steve Johnson, and earlier here.
Johnson makes one extremely revealing point:
"The chief problem for the yen is that the flattening of the US yield curve has made it uneconomical for Japanese investors to hedge their ongoing purchases of US Treasuries, but a falling yen encourages overseas investors to hedge their purchases of Japanese equities - negating the value of these latter flows in currency terms."
Obviously what we have is asymmetric hedging. This begins to solve what had long been a mystery for me: who was really buying into the sustained Japanese recovery argument. Obviously many of the Japanese themselves aren't (sensible them). But OPEC members are. Really they should sack all their financial consultants :). The big issue, of course, is the US yield curve. The chain normally cracks at its weakest point, so this is a must to watch. Also, I wonder how much asymmetric hedging is taking place in Germany?
Basically the growth imbalance between the US, Germany and Japan, and the inability of these latter two economies to 'normalise' interest rates is producing a significant distortion in the global financial system. The US can have interest rates in the 4 to 5% range and still grow faster than either of the other two.
Co-indidentally cross this with a petro-dollar surplus arising from the changing terms of trade, and you have all the ingredients for some kind of problem. Now let's wait and see what happens next. I'm fascinated.
Monday, November 28, 2005
Foreign Investors Buy Into the Japanese Recovery
Foreign investors buy into the Japanese recovery, but the Japanese themselves apparently don't, or at least if they do its's on nothing like the same scale. More to add to the puzzle I was getting at in my last post about how people seem to find all this so hard to understand or accept. Denial, what denial!
Foreign buying of Japanese stocks has reached a record level as global investors buy into the country’s economic recovery. Overseas investors bought Y9,441bn ($78.9bn) more in Japanese shares than they sold in the year to November 18, according to the Tokyo Stock Exchange. The figure includes trading on the Osaka and Nagoya exchanges and beats the previous record of Y9,127bn in 1999.
Feverish overseas interest has been the biggest reason behind Japanese stocks’ sharp rise. The Tokyo Stock Price index climbed 33 per cent to 1,529.67 by last Friday – though the rise is still dwarfed by the near 60 per cent increase in 1999.....
But the strong interest shown by foreigners contrasts with the scepticism of Japanese institutional investors, who are still net sellers. For this reason, Japan bears regard this year’s share price rally as very fragile.
Foreign buying of Japanese stocks has reached a record level as global investors buy into the country’s economic recovery. Overseas investors bought Y9,441bn ($78.9bn) more in Japanese shares than they sold in the year to November 18, according to the Tokyo Stock Exchange. The figure includes trading on the Osaka and Nagoya exchanges and beats the previous record of Y9,127bn in 1999.
Feverish overseas interest has been the biggest reason behind Japanese stocks’ sharp rise. The Tokyo Stock Price index climbed 33 per cent to 1,529.67 by last Friday – though the rise is still dwarfed by the near 60 per cent increase in 1999.....
But the strong interest shown by foreigners contrasts with the scepticism of Japanese institutional investors, who are still net sellers. For this reason, Japan bears regard this year’s share price rally as very fragile.
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