Bloomberg: Abenomics has chance to reshape Japan

[CityFarmer]

The Abenomics isn't promising, as of now....

Risks to 'Abenomics' growing, whether Japan PM raises tax or not
02 Oct 2014 06:48
[TOKYO] If history is a guide, a string of disappointing economic reports in Japan would seem to argue against raising the country's sales tax again. But the risks for "Abenomics" are increasing whatever Prime Minister Shinzo Abe decides to do.

A recovery in the world's third-biggest economy is faltering, despite Abe's massive monetary easing and government spending over the past 21 months, and Japan may already be sliding into recession just as Abe must decide whether to raise the tax once again.

The damage from am April tax hike has been worse than expected and worse than an increase in 1997, which began a tailspin that ended the career of the then prime minister.
...
Source: Business Times Breaking News

[greengiraffe]

BoJ eyes signal for flexibility on 2% target
DOW JONES NEWSWIRES OCTOBER 03, 2014 12:00AM

The Bank of Japan is likely to start playing up the flexible nature of the time frame for its 2 per cent inflation target, as doubts spread that the central bank will achieve that level by a widely perceived deadline of spring next year.

BOJ officials are considering flagging to investors that, while the central bank is committed to bringing about 2 per cent price growth, it is wrong to think that the bank means to achieve it precisely two years from the launch of its aggressive stimulus measures in April 2013, according to people familiar with the bank's thinking.

Signaling greater flexibility in the interpretation of the bank's time frame of "about two years" would likely prompt investors and economists to re-calibrate their views on what policy action the bank might take in the future.

Suggesting that the BOJ faces less time pressure than generally believed by investors could help prevent undue speculation for early policy action that might otherwise build up should price data prove sluggish over the coming months.

Around 10,000 Japanese companies expect that the overall consumer price index will rise at an average annual rate of 1.5 per cent in one year, a BOJ survey showed Thursday, unchanged from June and March. The actual inflation rate was 1.2 per cent in August, the month for which the latest data are available.

"Both the corporate sector and the market see lower CPI growth rates than the BOJ," said Kyohei Morita, chief Japan economist at Barclays.

Since the start of the current easing program, the BOJ has kept saying it aims to spur 2 per cent inflation in "about two years," without clearly specifying exactly where it draws its deadline.

The initial market assumption that this meant spring next year continues to hold fast, and because inflation is unlikely to reach 2 per cent by then, it is natural for market participants to bet on the need for additional stimulus steps by the BOJ to hit its target on time.

But officials have a much looser interpretation of the time frame, with some even thinking that three years after the launch of the easing program falls under the definition of "about two years," the people said.

If the core CPI -- which strips out volatile fresh food prices -- reaches 1.9 per cent over the year through March 2016, as the BOJ has forecast, the bank's policy-making board "would likely determine that their commitment to achieving 2 per cent in 'about two years' has been fulfilled," one of the people said.

The 1.9 per cent figure refers to the median forecast of the central bank's nine board members.

Some bank officials privately estimate that the inflation rate will still be below 1.5 per cent in April, the people said.

Debate also seems to be going on inside the BOJ over the more fundamental question of whether it is appropriate to raise inflation in a hurry through more aggressive policy measures to meet a two-year time frame, especially when the economy is struggling to recover from the hit from a national sales tax increase in April.

If prices rise too fast, too quickly relative to workers' paychecks or the rate of growth in languishing local economies, the Japanese could suffer rather than benefit, at least over the short-term, from a long-awaited exit from 15 years of deflation, the people said.

"We may consider additional easing if the price outlook worsens, but even in such a situation, we need to think about monetary policy from the perspective of whether we can achieve 2 per cent without putting unreasonable burdens on companies and households," BOJ board member Sayuri Shirai said at a news conference in May.

Falling real wages have become a political hot-button issue in Japan, particularly since the increase in the sales tax to 8 per cent from 5 per cent sapped households' purchasing power. After a weak yen brought about by the BOJ's easing failed to boost exports, the focus of public debate has also shifted to the negative aspects of a falling currency, such as the rising cost of living prompted by higher import prices.

But de-emphasizing the "two year" time frame without sparking doubts over the bank's commitment to its inflation goal will likely require delicate handling.

Many foreign investors have built investment positions believing that the end of "about two years" corresponds to around April 2015, and the BOJ will need to act if it deems that meeting that goal is difficult, a senior currency trader at a major European bank said.

Should the BOJ deny such a view and at the same time keep its powder dry, "that will probably affect the foreign exchange rate as well as stock markets," the trader said.

[greengiraffe]

BoJ holds off fresh stimulus
OCTOBER 07, 2014 5:45PM

The Bank of Japan has struck a less optimistic tone on its view of the world's third-largest economy, but it held off launching fresh monetary easing measures after a two-day meeting.

The central bank, which has been upbeat on Japan's prospects, flagged housing and industrial production as weak spots in a statement outlining its unanimous decision.

It added that an uptick in business sentiment has "paused" on the back of an April sales tax hike that led to a sharp contraction in second-quarter gross domestic product.

"Japan's economy has continued to recover moderately as a trend," the BoJ statement said on Tuesday, but it noted "some weakness, particularly on the production side" as demand dived after the introduction of April's sales tax hike.

Investors will now turn their focus to governor Haruhiko Kuroda's post-meeting comments as speculation increases that the BoJ will be forced to act as the economy continues to struggle.

Kuroda's upbeat take on Japan's economy has appeared increasingly at odds with the official data, as Japan's economy suffered in the April-June quarter its deepest contraction since the 2011 quake-tsunami.

The rise was seen as crucial to chopping a mammoth public debt but economists warned it could derail a budding recovery in an economy beset by years of deflation.

The 1.8 per cent dip in gross domestic product - or a 7.1 per cent contraction at an annualised rate - gave the clearest picture yet of the tax hike's impact, and threw into question Tokyo's plans for another rise next year.

Millions of shoppers made a last-minute dash to stores before prices went up on April 1, which was followed by a slump in spending.

[greengiraffe]

BoJ says inflation moving towards target
DOW JONES NEWSWIRES OCTOBER 17, 2014 9:00PM

Bank of Japan Governor Haruhiko Kuroda said on Friday that the central bank is "steadily" on track to achieve its inflation target of 2 per cent, suggesting he feels little pressure to ramp up stimulus efforts despite a sluggish economy and a tumbling Tokyo stock market.

"A positive growth mechanism... is firmly in place both in the corporate and household sectors," Mr Kuroda said in a speech at a meeting sponsored by Community Bank Shinyo Kumiai, a group of credit unions. "Our country's economy remains on a moderate recovery trend."

Mr Kuroda added that the rate of inflation, as measured by consumer prices excluding fresh food costs, will hover around levels above 1 per cent "for some time" before rising toward 2 per cent, countering the popular market view that it will soon drop below 1 per cent.

While Mr Kuroda signaled his confidence in the price outlook, he left the timing vague of when exactly he thinks the inflation rate will reach 2 per cent. He only said there is a "high possibility" of the core inflation rate rising to that level around the middle of the period between April 2014 and March 2017.

[greengiraffe]

Chinese smartphones lift Japan’s electronics business
DOW JONES OCTOBER 21, 2014 12:30PM

KYOTO, Japan-China’s smartphone boom is being fuelled by an unlikely source: Japanese parts makers.

Upstart Chinese phone makers like Xiaomi Inc., Lenovo Group Ltd. and Huawei Technologies Co. are increasingly undercutting smartphone giants like Apple Inc. and Samsung Electronics Co. with high-performance, low-cost handsets.

A significant portion of those handsets’ guts-as much as 50 per cent by value, in some cases-is made by Japanese companies like Murata Manufacturing Co. or TDK Corp. Those parts range from displays and Wi-Fi modules to tiny, energy-storing ceramic capacitors.

“Almost all cellphone manufacturers are our customers,” said Tsuneo Murata, president of Murata, which makes capacitors and other components. “The pie for the component demand is growing.”

The parts sales are a rare bright spot in Japan’s gloomy electronics industry, and China’s smartphone market-the world’s largest and growing at 19 per cent a year, according to Counterpoint Research-is a big factor. Sales there are being fueled by cutthroat competition among dozens of brands, some of which offer smartphones at less than US$100. Lower prices mean smaller budgets for parts, but Japanese suppliers often provide a larger share of components to Chinese brands than to Apple or Samsung, analysts say.

In the second quarter of this year, Xiaomi leapfrogged Apple and Samsung to become the best-selling smartphone provider in China, according to Canalys, a research firm. Counterpoint says Chinese brands will capture about three-quarters of the domestic market this year, in terms of volume, up from one-third in 2010.

Chinese companies are boosting purchases of Japanese parts as they push beyond the domestic market, in order to upgrade their phones. In some Chinese-branded phones, Japanese suppliers provide up to half of the parts by value, said Daiki Takayama, an analyst at Goldman Sachs.

Another Chinese smartphone maker, ZTE Corp. , buys displays fromSharp Corp. of Japan for its high-end phones, along with camera modules from Sony Corp. , said Lu Qianhao, head of the company’s handset marketing strategy. He cited technological know-how, manufacturing expertise and quality control as advantages of Japanese suppliers.

By contrast, Japanese suppliers account for about one-third of the bill of materials for the latest iPhones, and less than that for Samsung phones, said Shoji Sato, an analyst at Morgan Stanley MUFG Securities.

Even phone-screen maker Japan Display Inc., whose shares plunged last week after it predicted a loss this fiscal year because of delays in shipments to Apple, says that it expects sales to Chinese smartphone makers to nearly triple to ¥180 billion (US$1.68 billion) during the same period.

Japan Display makes liquid-crystal displays for smartphones and tablet computers, one of the most competitive areas in the parts business, in which rivals like LG Display Co. of South Korea have been making inroads. Suppliers like Murata that dominate hard-to-copy niches are doing better.

Murata, which is based in Kyoto, built on a long tradition of ceramics-making in Japan’s former capital to hone its specialization in capacitors and related components.

The company’s latest capacitors are not much bigger than a grain of sand, but they contain about 100 layers of ceramics, and Murata uses proprietary machines and methods to make them.

“It’s like making a good mille-feuille,’’ Mr. Takayama said. “You can buy a very high-quality egg, the best vanilla essence or whatever, but nobody else knows how to mix it or how long to bake it.”

Because Murata is the world’s largest supplier of capacitors for phones, with a 35 per cent share, it can assure manufacturers of a reliable supply, analysts say. That is important given the tight schedules of the smartphone business.

Capacitors cost pennies or less, but state-of-the-art handsets contain 700 to 800 of them-three or four times as many as in previous generations of smartphones, the company says.

Mr. Sato estimated that Murata sells US$2 to US$3 worth of parts to most Chinese smartphone makers per handset. Given that Xiaomi alone has forecast shipments of 60 million phones in 2014 and 100 million next year, that is a solid source of revenue. Apple, which uses more capacitors, as well as other parts that Chinese makers don’t generally source from Murata, buys about US$9 to US$10 worth of Murata parts for every iPhone, Mr. Sato estimated.

Murata’s sales of parts to smartphone makers and other suppliers of communications gear rose about 90 per cent over the past five years, to ¥430 billion in the year ended March 31, boosting overall sales by about 60 per cent, to ¥847 billion.

The Kyoto area, also home to parts makers like Rohm Semiconductor , NidecCorp. and Kyocera Corp. , has been one of the biggest beneficiaries of the Chinese smartphone boom. TDK, which is based in Tokyo and makes capacitors and other parts, says its sales to Chinese smartphone makers rose 50 per cent in the April-June quarter.

The push to automate smartphone assembly plants in China, including those making phones for non-Chinese brands, is providing a further boost to Japanese suppliers. Fanuc Corp. , a maker of industrial robots that is based in the shadow of Mount Fuji, in September sharply upgraded its forecast for sales and earnings in the financial year ending in March by 29 per cent and 26 per cent, respectively.

Katsushi Saito, an analyst at Nomura Securities, said increased orders for plants owned by Hon Hai Precision Industry Co. , which operates under the trade name Foxconn Technology Group and is a major assembler of Apple and Xiaomi phones, was the likely reason.

A spokesman for Fanuc said he couldn’t disclose the names of the company’s clients. Apple didn’t respond to a request for comment. Xiaomi and Foxconn declined to comment.

Much of the growth in demand for parts this year was linked to China’s rollout of high-speed networks and the handsets that operate on them.

Japanese parts suppliers have also benefited from the recent weakness of the Japanese yen, which reduces a price gap with competitors in South Korea and China.

Like other parts suppliers, Murata is looking beyond the boom in Chinese smartphones to new markets like wearable technology, as well as existing industries with a growing appetite for precision electronics parts, such as the automotive and health-care businesses, Mr. Murata said.

[greengiraffe]

Japan downgrades economic outlook again
DOW JONES NEWSWIRES OCTOBER 21, 2014 7:45PM

Japan downgraded its overall assessment of the economy in October for the second consecutive month, citing a slowdown in production, likely adding to concerns over whether the government will go ahead with a second sales tax increase next year.

The report is the latest acknowledgment that the economy is continuing to struggle after a higher sales tax rate introduced earlier this year weakened the momentum of a recovery jump-started by Prime Minister Shinzo Abe's pro-growth policies.

In its monthly economic report released on Tuesday, the government said the overall economy was recovering moderately, though "weakness can be seen recently." In September the government noted only "some weakness."

The cause for the deterioration in the view was industrial output, which the government said was "decreasing recently" in the wake of a chill in demand after the national sales tax rose to 8 per cent from 5 per cent in April. The government said in September that production was "weakening."

Japan is set to raise the sales tax again to 10 per cent in October 2015, provided economic conditions permit, yet some lawmakers and advisers to Mr Abe have said that the second increase should be postponed. They say the government should avoid a replay of the first half of 2014, when consumption and output surged before falling off sharply after the levy rose on April 1.

The prime minister has said he would pay close attention to growth figures for the July to September quarter when making a final decision before the end of the year on whether to proceed. The economy contracted at an annualised rate of 7.1 per cent in the April-June trimester, but is expected to show some growth on quarter in the following three-month period.

Tuesday's report marked the first time the government has downgraded it economic assessment for two straight months since 2012.

[CityFarmer]

Finally the BOJ actions. I reckon the stopping of Fed's QE plays a part here...

BOJ shocks markets with surprise easing as inflation slows

TOKYO - The Bank of Japan surprised global financial markets on Friday by expanding its massive monetary easing as economic growth and inflation have not picked up as expected after a sales tax hike in April.

The jolt from the BOJ, which had been expected to maintain its level of asset purchases, came as the government signaled its readiness to ramp up spending to boost the economy and as the government pension fund, the world's largest, was set to increase purchases of domestic and foreign stocks.

After a tight 5-4 vote by its board members, the BOJ said it would accelerate purchases of Japanese government bonds so that its holdings increase at an annual pace of 80 trillion yen ($723.4 billion), up by 30 trillion yen.

The central bank will also triple its purchases of exchange-traded funds (ETFs) and real-estate investment trusts (REITs) and buy longer-dated debt.
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http://www.todayonline.com/business/boj-...cy-further

[BlueKelah]

Not gonna work, they need to do hard unpopular stuff like cutting down expenses and paying off debt before their economy can recover. Plus get rid of all the tax burden and gst.

via tapatalk

[AlphaQuant]

Size of the stimulus is eye-popping.

At the peak of QE3, 85bio USD per mth i.e. 1020bio p.a. was pumped for US GDP of 16 trillion.

Japan is going to pump 700bio p.a. for a GDP of 5 trillion.

[greengiraffe]

Japan’s QE bombshell jolts Nikkei
TAKASHI NAKAMICHI AND TATSUO ITO THE WALL STREET JOURNAL NOVEMBER 01, 2014 12:00AM

Prime Minister Shinzo Abe is under pressure to push back a sales tax increase planned for next year. Source: AFP

THE Bank of Japan yesterday unexpectedly announced additional stimulus measures, bolstering its asset purchases for the first time in over a year and a half, as its 2 per cent inflation target looks increasingly untenable.

The benchmark Nikkei stock index spiked to a seven-year high on the BoJ bombshell. It was up 4.7 per cent in late trade, building on early gains from the news of the asset-allocation changes by the Government Pension Investment Fund.

The policy move underscores how Prime Minister Shinzo Abe’s economic revival plan has gotten off track since a national sales tax increase in April this year damped consumer spending, sending repercussions across the world’s third-largest economy.

Moving in the opposite direction from the Federal Reserve, the BoJ policy could have broad implications for markets, such as by benefiting Japanese exporters by knocking the yen further down against the US dollar.

Specifically, the BoJ said it would expand its annual asset purchases — its main tool to spur higher inflation — to ¥80 trillion ($822 billion) from the previous target range of ¥60 trillion-¥70 trillion. The central bank aims to achieve the new target mostly by buying more Japanese government bonds, cementing its status as the single largest investor in JGBs. The BoJ also said it would triple the pace of its purchases of stock and property funds. The decision by the central bank’s nine policy board members was split with five members in favour and four members opposed. It was the first split vote on policy since Governor Haruhiko Kuroda took helm of the central bank in March last year.

Japan’s inflation rate fell to its lowest in nearly a year and a measure of job creation worsened for the first time in more than three years, highlighting the divergence between developments in the economy and policy makers’ optimistic projections.

Official data for September released yesterday in Japan contrasts starkly with economic indicators out of the US, where the Federal Reserve has just ended its unorthodox stimulus measures, suggesting the US can’t look for much help from Japan in driving global growth.

The latest data could put more pressure on Mr Abe to push back a planned national sales tax increase next year and sparked the aggressive easing measures.

Adjusted for an increase in the sales tax to 8 per cent from 5 per cent in April, the nationwide core consumer-price index rose 1.0 per cent from a year earlier in September, after climbing 1.1 per cent in the previous month, the government said.

The figure is the lowest in 11 months, moving further away from the central bank’s price target of 2 per cent. While the slowing of inflation may be due largely to a sharp drop in global oil prices, it comes as Japan’s economy continues to struggle to regain momentum after a sales tax increase worth roughly $80bn ($91bn) a year took the steam out of consumer spending, a development that reverberated throughout the economy.

Chief economist at SMBC Nikko Securities Junichi Makino said he expects the core inflation rate will fall below 1 per cent in October, and drop further to 0.5 per cent by March.

Officials have kept a brave face regarding data that doesn’t fit with their picture of the economy, pointing to solid employment as evidence of underlying economic strength and a harbinger of greater inflationary pressure.

But yesterday’s data fuelled debate over whether the impact of the tax change is beginning to ricochet against the labour market, which feels the heat of an economic downturn after the broad economic trend has changed.