Bloomberg: Abenomics has chance to reshape Japan

[greengiraffe]

Japanese bond yield falls to zero as investors look for safe haven
ELEANOR WARNOCK AND KOSAKU NARIOKA THE WALL STREET JOURNAL JANUARY 15, 2015 12:00AM

Japanese bond yield falls to zero
A stocks indicator in Tokyo. Yields in Japan are falling along with those in the US and Europe amid global growth fears. Source: AP
YIELDS on Japanese government bonds hit record lows this week as foreign investors, concerned about lower oil prices, looked for a safe place to park their money.

The yield on the five-year government bond hit zero for the first time, while the benchmark 10-year yield fell to a record low 0.255 per cent.

Yields in Japan are falling along with those in the US and Europe, as a slide in oil prices heightens concerns about global growth and, in some markets, slowing inflation or even deflation.

As oil prices have spiralled downward, global equities have slumped, driving investors to seek safety in bonds, pushing down yields, which move inversely to prices. Yields on 10-year US ­Treasury notes on Monday fell to 1.91 per cent, the lowest in more than a year, and five-year German government bond yields are at negative 0.007 per cent. Takahiro Sekido, Japan strategist at Bank of Tokyo-Mitsubishi UFJ, cited the Swiss National Bank ’s decision last month to introduce negative interest rates on bank deposits, following a similar decision by the European Central Bank earlier in the year, as one factor behind the move into Japanese government bonds.

The Swiss bank’s decision caused some people to favour the yen over the franc, another traditional haven currency. “The negative rate on Swiss franc debt is a reason yen rates have been falling since the beginning of the year,” he said.

In this environment, Japanese bonds are winning a “least ugly contest,” traders and fund managers say.

“For reserve managers at foreign central banks and other asset managers who need to buy safe, short-term assets, Japanese government bond yields are attractive,” Mr Sekido said.

To be sure, the Bank of Japan remains the dominant force in the domestic bond market, buying ¥8 trillion ($82.9 billion) to ¥12 trillion a month of Japanese government bonds and driving yields lower as it seeks to flood the economy with cash to defeat more than a decade of deflation. Few investors are willing to bet against Japanese government bonds with the BoJ buying at that volume.

The central bank has been joined by foreign investors, who poured a net ¥8.7 trillion last year into medium and long-term Japanese debt, mostly government bonds, according to the Ministry of Finance.

That is the most in one year since 2007, and came despite rock-bottom yields and concerns about the nation’s towering public debt. In fact, the yield on the 10-year government bond has fallen from around 0.415 per cent a day after Moody’s Investors Service downgraded Japan’s sovereign credit rating early last month.

Still, it was uncertain that foreign investors will continue to buy at the same rate this year, said ­Makoto Noji, a strategist a SMBC Nikko Securities.

This week’s yield declines were mostly a reaction to declines in US Treasury yields as well as expectations for lower oil prices to hold down inflation in Japan, he said. Lower inflation is better for fixed-rate bond investors as higher prices eat into the value of a bonds’ fixed-rate payments and principal.

Another source of demand for Japanese government bonds may be fading. Last year, foreign investors lent dollars to eager Japanese investors using a cross-currency swap agreement, in which an investor lends in one currency and borrows in another.

Foreign investors put some of the yen that they borrowed via the agreement into Japanese government bonds, but this year demand for foreign currencies among Japanese investors has faded, at least for now, meaning fewer foreign investors may take advantage of such trades.

[CityFarmer]

A critical movement of Abenomics, or more specifically the BOJ...

BOJ faces crunch time as oil slump threatens inflation target

TOKYO - Bank of Japan policymakers gathering for a rate review this week will face the daunting task of coming up with a reason why they can hold off on expanding stimulus for now, even as slumping oil prices keep inflation further away from their 2 percent target.
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http://www.todayonline.com/business/boj-...ion-target

[CityFarmer]

BOJ cuts inflation forecast, expands loan scheme instead of QQE

TOKYO - The Bank of Japan cut next fiscal year's inflation forecast on Wednesday and expanded a loan scheme aimed at boosting lending, hoping to deflect criticism it is sitting idly by as a slump in oil prices pushes inflation further away from its target.

As widely expected, the BOJ held off on expanding its massive stimulus program and maintained its pledge to increase base money at an annual pace of 80 trillion yen ($678 billion) through buying government bonds and risk assets.

In a review of its long-term estimates, the BOJ cut its core consumer inflation forecast for the year beginning in April to 1.0 percent from 1.7 percent projected three months ago.

But it slightly raised its inflation forecast for fiscal 2016 to 2.2 percent from 2.1 percent, a sign central bankers are publicly sticking to the view Japan will hit an inflation goal of 2 percent.
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http://www.todayonline.com/business/boj-...nstead-qqe

[bear]

Piketty’s solution for Japan’s sick economy? A fourth arrow
BY WILLIAM PESEK

Toyota’s projected record $18 billion windfall profit should put a smile on Prime Minister Shinzo Abe’s face. This was, after all, how his economic strategy was supposed to work — after two years of driving down the value of the yen and filling the coffers of the nation’s giant exporters, they in turn would give workers fat pay rises. Hello consumer spending, goodbye deflation.

Except Toyota isn’t sharing the spoils. Like most of Japan’s industry bosses, Akio Toyoda, the company president, is hoarding the cash. Abenomics may be great for corporate Japan, but most of the nation’s 127 million people are still waiting for any benefit. How to move the wealth along? Well, there’s someone traveling the country who might offer Abe’s team a clue: Thomas Piketty.

Over the past week, the French economist has received rock-star treatment in Japan, where the translation of his 2013 book on inequality has hit bookshelves. The problem, Piketty argues, is that the Bank of Japan’s ultra-loose policies are ginning up stocks and real estate, assets that tend to further enrich the wealthy.

Meanwhile, the 30 percent plunge in the yen, disappearing bank-account interest and rising household costs are hurting everyone else. The BOJ, in other words, is increasing the gulf between the haves and have-nots.
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http://www.japantimes.co.jp/opinion/2015...NoYtdJHKSo

[corydorus]

Wonder Abe would be upping corporate taxes with weakened yen. In this way, corporate not impacted, money in gov hands to spend bigger on public.

[FA+TA]

February 9, 2015
U.S. academics condemn Japanese efforts to revise history of ‘comfort women’
The Washington Post
By Anna Fifield

TOKYO — A group of American historians is issuing a call to their Japanese counterparts to remain steadfast in the face of pressure from Prime Minister Shinzo Abe’s government to play down the army’s use of “comfort women” during World War II.

As it prepares to mark the 70th anniversary of the end of the war, Abe’s conservative government is pushing to put a gloss on Japan’s wartime history and, in turn, to loosen some of the postwar constraints on its military.

“We stand with the many historians in Japan and elsewhere who have worked to bring to light the facts about this and other atrocities of World War II,” says a letter signed by 19 academics from American University as well as Princeton, Columbia and others, referring to the “comfort women” who were coerced into working in Japanese military brothels during the 1930s and 1940s.

“As historians, we express our dismay at recent attempts by the Japanese government to suppress statements in history textbooks both in Japan and elsewhere about the euphemistically named ‘comfort women,’ ” says the letter to be published in the March issue of the American Historical Association’s magazine, Perspectives on History.

The comfort women, many of whom were Korean, have become a major source of contention between the Japanese and South Korean governments. Many Japanese conservatives say the women were simply prostitutes, while Seoul accuses Tokyo of trying to whitewash history.

The Comfort Woman statue stands beside an empty chair symbolizing survivors who have reached old age without having yet witnessed judgement in Glendale, Calif. (Frederic J. Brown/AFP/Getty Images)

Both governments have turned up the volume in their efforts to sway international opinion, most recently with a Japanese attempt to get McGraw Hill, the American publishing house, to remove two paragraphs about comfort women from a college textbook.

The book, “Traditions and Encounters: A Global Perspective on the Past,” says the Japanese army “forcibly recruited, conscripted, and dragooned as many as 200,000 women aged 14 to 20 to serve in military brothels, called ‘comfort houses.’ ” It also says that the Japanese imperial army “massacred large numbers of comfort women to cover up the operation.”

A key part of the dispute over comfort women revolves around the number of women forced into sexual slavery and the precise role the military played in their procurement.

Work by academics, especially Japanese historian Yoshiaki Yoshimi, has “rendered beyond dispute the essential features of a system that amounted to state-sponsored sexual slavery,” the historians’ letter says.

McGraw Hill refused to change the textbook, saying that “scholars are aligned behind the historical fact of ‘comfort women’ ” and that it “unequivocally” stands behind the book.

“When you start targeting history, then go across borders, then we as historians have to stand up in solidarity for what we do,” said Alexis Dudden, a University of Connecticut professor who was one of the organizers of the letter.

“We do not want this to be seen as Japan-bashing,” she said. “It’s the opposite of Japan-bashing. It’s a statement in support of our Japanese colleagues.”

Herbert Ziegler, an associate professor at the University of Hawaii and co-author of the textbook, said the Japanese request to remove the paragraphs was “an infringement of my freedom of speech and my academic freedom.”

Ziegler said that he received an e-mail from an official in the Japanese Consulate in Hawaii late last year, requesting a meeting to discuss the passages in the book. He declined.

Then, Ziegler said, two officials showed up in his university office during office hours, when the door was open, and “just came in and sat down and started telling me how wrong I was.”

“It’s a very strange game that they’re playing here,” he said.

Takako Ito, a Foreign Ministry spokeswoman, said the Japanese government “respects and values [the] freedom of expression” of the publisher and authors but that the textbook “includes some factual inaccuracies.”

“What Japan is asking for is to be given proper evaluations by the international community on what Japan has done, based on the understanding of accurate facts. Japan should be given a fair opportunity to present its concerns,” she said. “From this perspective, the government of Japan explained to the publisher and to the author, through its overseas diplomatic missions, Japan’s understandings and what Japan has done.”

Abe has signaled that in a speech on the 70th anniversary of the war’s end this summer, he will not repudiate an official apology issued in 1993. Still, he recently said in parliament that he was “shocked” by the textbook and that the government must step up its efforts to disseminate the “correct” view abroad.

Katsuto Momii, the president of the Japanese broadcast company NHK, said Friday that it would have to “consider very carefully whether it’s truly appropriate” to pick up the issue of comfort women while the government policy remains unclear.

Critics attacked the comment as proof that the broadcaster, which is supervised by the government but insists that it is editorially independent, was toeing the government line.

“There’s no change in the way we stick to independence, autonomy, fairness, equity and political neutrality while creating shows,” NHK spokesman Shoji Motooka said.

South Koreans also have been assiduously pushing their case in the United States, erecting memorials to “comfort women” in Virginia and California, where there are large Korean American communities. They also have been lobbying some states to change their school textbooks to use South Korean names for disputed waters and territories.

[greengiraffe]

Luck has bought a little time for Abenomics
812 words
13 Mar 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

Is Abenomics a busted flush? To sceptics it must certainly look that way. Japan's growth has faltered. A downward revision this week showed the economy expanded at an annualised rate of 1.5 per cent in the fourth quarter. That may not sound too bad for a mature economy that has not exactly dazzled in recent years. However, it comes after two quarters of sharp contraction. Output actually shrank in 2014, albeit by a minuscule 0.03 per cent.

Negative growth, however minor, is hardly the "escape velocity" economists say Japan needs to shake off 20 years of deflation.

Banishing deflation was supposed to be the core of Abenomics, introduced by Prime Minister Shinzo Abe in December 2012.

Here again, news looks bad. Haruhiko Kuroda, the central bank governor, promised to hit 2 per cent inflation within "about two years" of April 2013. He is now fudging. In the language of central bankers, apparently, "about two years" can mean three years or more.

So much for transparency. Core inflation, which includes energy, is running at just 0.2 per cent. Unless oil prices stage a sudden rally, Japan could soon find itself back in deflation. Abenomics without inflation is like Hamlet without the ghost.

Weak inflation puts pressure on the Bank of Japan to undertake yet more quantitative easing after its surprise second salvo last October. If it does not act, it could lose credibility both with markets and with a public that needs convincing inflation is here to stay.

Low inflation stems in part from a policy blunder: last year's three-point rise in consumption tax just when consumers were being asked to spend. Instead, they snapped their wallets shut.

All this makes it hard to argue that things are going to plan.

And yet the picture is more positive than it appears. The bigger reason for disinflation is the low oil price. That may present the BoJ with a quandary - but for the economy overall it is excellent news. Japan is a huge energy importer, more so since it closed its nuclear reactors after a tsunami struck the Fukushima plant four years ago. Cheap oil ought to do wonders for demand. It should also allay concerns about current account deficits. This year, Japan's surplus should hit a robust 3 per cent.

Crucially, disinflation may be a prelude to demand-led "inflation". How might this work? After Abenomics was launched, inflation rose quickly to about 1.5 per cent on the back of high oil prices and a weak yen. While economists celebrated, consumers wondered where their spending power had gone. This year, precisely the opposite should happen. Corporate profits have never been higher. Exports are strong. Even sunset industries such as shipbuilding are making a comeback. As a result, companies - under intense pressure from the Abe government - may raise base wages in this month's annual pay talks by up to 2 per cent.

Even before January's annual pay round, basic pay - excluding bonuses - was up 0.8 per cent on the previous year, the steepest rise in 15 years. A combination of flat or falling prices and higher wages could produce a mini-consumer boom.

Nor is that potentially rosy scenario just down to cheap oil. The labour market is the tightest it has been in years. That is partly because, in spite of last year's two weak quarters, output has been rising at above trend rate for more than two years.

Demographics are also playing a part. As the workforce shrinks, by about 300,000 each year, businesses from builders to care homes find themselves short of staff. Since Abenomics started, nearly 1 million women have joined the workforce. Most have taken on lower-paid work but even this may be changing.

There are tentative signs that companies are starting to put contract workers in better-paid full-time jobs, says Jesper Koll, director of research at JPMorgan.

Japan, he adds, could be the only wealthy nation that is actually increasing the size of its middle class.

None of this means Mr Abe can breathe easily. There is still a looming debt problem even if, largely thanks to booming tax revenues, bond issuance has been cut below ¥40 trillion ($433 million) for the first time since 2009. Even if a shrinking workforce provides a short-term fillip, in the medium term Japan will have to grapple with how to finance the needs of an ageing population. Those who put their faith in structural reforms also complain that "third arrow" of Abenomics has not yet left the quiver.

Yet, for all these concerns, the economy may well defy the pessimists this year and next. Certainly, it would be premature to declare victory. But neither is Abenomics dead and buried just yet.


Fairfax Media Management Pty Limited

Document AFNR000020150312eb3d00029

[greengiraffe]

Japan’s consumer inflation slides to zero, a setback for Abenomics
TATSUO ITO AND JACOB M SCHLESINGER THE WALL STREET JOURNAL MARCH 28, 2015 12:00AM

Zero inflation a setback for Abenomics
Japanese Prime Minister Shinzo Abe. Source: AFP

The core gauge of Japanese consumer prices was flat from a year earlier in February, deepening worries that Japan is heading back towards deflation two years after its central bank launched a radical revival program.

The government said yesterday the core consumer-price index hit 0 per cent, the lowest level since May 2013 and far from the 2 per cent target that the central bank had pledged to hit by this northern spring. The index ­excludes fresh food prices and ­effects of a tax increase.

The price data underscores the ongoing difficulties Prime Minister Shinzo Abe faces in pulling the world’s third-largest economy out of its long slump and eradicating the deflation that had long ailed the nation.

Bank of Japan governor Haruhiko Kuroda insists he is still on track, albeit on a delayed timetable, to reach his price goal.

But he has had much more trouble gathering traction than many economists had hoped for at the outset of his campaign in April 2013. The main reason for price weakness is a drop in global oil prices, something beyond the central bank’s control.

Surveys show most BoJ watchers expect Mr Kuroda to expand his stimulus program this year to push ahead with his fight against deflation. “The BoJ should consider undertaking additional easing as early as April, or its credibility as a deflation fighter could suffer,” said Goshi Kataoka, chief economist at ­Mitsubishi UFJ Research and Consulting.

Still, Mr Kuroda faces growing challenges in continuing his quest, as business executives, economists, politicians and even some of his own policy board members, have turned increasingly wary of the side ­effects from his record-shattering asset-­purchases.

“The experiment is over,” declared Miyako Suda, who served as a policy board member until 2011, as she expressed opposition to further easing by the BoJ.

“Monetary policy alone wasn’t sufficient to hit the 2 per cent target,” said Kazumasa Iwata, a former BoJ deputy governor. He cautioned about the risk of the economy falling back into a sustained price decline.

To be sure, the economy has some bright spots, according to other data released yesterday. As a shrinking working-age population and growth in construction work, in part fed by fiscal stimulus, tighten the labour market, the jobless rate fell to 3.5 per cent in February, from 3.6 per cent in January, while the jobs-to-applicants ratio rose to 1.15, its highest level since March 1992. That means there were 115 jobs available for every 100 jobseekers.

That, however, hasn’t translated into more spending by consumers. Household spending fell 2.9 per cent from a year earlier in February, marking the 13th consecutive decline. Retail sales fell 1.8 per cent from a year earlier.

Big companies such as Toyota have reported record profits, prompting them to hand out the largest pay increases for their workers in years. Such moves, if sustained, could fuel the virtuous cycle recovery that Mr Kuroda has been seeking.

Pinched by higher import costs, the result of the BoJ’s yen-weakening, as well a sales tax increase, Japanese consumers have been hesitant to spend.

Some of that has been the result of developments outside the central bank’s control. The sales tax increase enacted last April to curb Japan’s government debt doused much of the gains from the BoJ’s stimulus. A plunge in oil prices has dragged down inflation and is seen as having just a temporary impact on prices.

But at core, BoJ officials say they have found it much more difficult than expected to smash what Mr Kuroda calls “the deflationary mindset” of more than a decade of cautious pessimism that has suppressed risk-taking, and fed a downward cycle of falling prices, wages, spending and investment.

[CityFarmer]

Abenomics without the 3rd arrow, may not work. Furthermore, with yuan devaluation, the lowly priced Japan Yen, isn't as effective tool as before...

Japan economy shrinks in second-quarter in setback for 'Abenomics'

TOKYO - Japan's economy shrank at an annualized pace of 1.6 percent in April-June as exports slumped and consumers cut back spending, a bad omen for Prime Minister Shinzo Abe's policy drive to lift the economy out of decades of deflation.

China's economic slowdown and its impact on its Asian neighbors have also heightened the chance that any rebound in growth in July-September will be modest, analysts say.

The gloomy data adds to signs that Japan's economy is at a standstill and may rekindle market expectations that the Bank of Japan will expand monetary stimulus later this year.
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http://www.todayonline.com/business/japa...ssion-2014

[CityFarmer]

The Abenomic, is likely lacking of support from the ground. The feedback from the ground, is always more "accurate" from official announcement...

Japan’s retail sector sounds alarm on spending

TOKYO — Do not believe in official statistics, Japanese retailers seem to be saying, as they warn of lacklustre consumer spending, a key growth engine for Japan at a time when exports and factory output are stalling.

If you go by the larger-than-expected 2.9 per cent gain in household spending in August — the first year-on-year rise in three months — then consumption looks like it is finally alive and well again, after a sales tax hike last year stifled the economy.

But profits of retailers suggest the spending data has not captured the full picture. Restrained household consumption raises the stakes for a central bank policy meeting due on Oct 30, and for the government’s plan to flesh out new economic policies.
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http://www.todayonline.com/business/japa...m-spending