17 Apr, 2013 –

The International Monetary Fund  has boosted its forecast for Japan’s economy this year and 2014, saying the latest fiscal stimulus will help the country exit years of deflation. In its latest World Economic Outlook, the IMF tipped Japan’s economy  to grow 1.6 per cent in 2013 and 1.4 per cent the next year, up from its January forecast of 0.4 per cent and 0.7 per cent.

The IMF also said consumer prices will edge up 0.1 per cent on-year in 2013, but rocket 3.0 per cent in 2014, thanks to the Bank of Japan’s fresh monetary easing announced this month. That compares with zero per cent inflation in 2012, while the Fund’s 2014 forecast is much higher than Tokyo’s target of two per cent.

“After many years of deflation, and little or no growth, the new government has announced a new policy, based on aggressive quantitative easing, a positive inflation target, fiscal stimulus, and structural reforms,” the Fund said. “This policy will boost growth in the short term” and that is reflected in the IMF’s latest forecasts, it said.

Since coming to power in December, Japanese Prime Minister Shinzo Abe has embarked on a huge stimulus spending program  and appointed a new central bank chief who agreed on the need to take aggressive monetary easing  to save the fragile economy from years of deflation. Two weeks ago BoJ governor Haruhiko Kuroda unveiled plans to speed up the printing presses, doubling the amount of money in circulation over the next two years as it targets two per cent inflation within two years.

The IMF said the BoJ’s new monetary easing framework “is welcome” but with a caveat: “For (the BoJ) to be successful and achieve two per cent inflation within two years, easing must be accompanied by ambitious growth  and fiscal reforms to ensure a sustainable recovery and reduce fiscal risks.” Referring to Japan’s accumulated public debt that sits above 200 per cent of gross domestic product, the IMF said Japan needs “strong medium-term plans to arrest and reverse the increase” in public debt.

_{(Source – “Business Spectator”, Pic – Japanese Yen / EO Kenny )}

17 Apr, 2013 –

Investing in Tokyo apartments beat putting money into office buildings, malls and the domestic stock and bond markets over the past five years as a housing shortage cushioned rental incomes from years of deflation. Apartment real estate investment trusts produced the best returns, adjusted for price swings, of Japanese REITs in the five years through March, the BLOOMBERG RISKLESS RETURN RANKING shows. Daiwahouse Residential Investment Corp.  led all REITs with a 5.5 percent risk-adjusted return, followed by Advance Residence Investment with a 5.4 percent gain. REITs that buy apartments benefited from a shortage of new supply and a stable number of tenants in a nation where less than half of Japanese under the age of 40 own their own home.

Japan has accelerated efforts under Prime Minister Shinzo Abe to end deflation and boost the world’s third-largest economy, including measures to revive the property industry, which has been struggling since an asset bubble burst two decades ago. The government has a target to increase assets owned by REITs by 40 percent by 2020.  “It’s all about stability,” said Hideyuki Shinkai, who helps oversees 51.4 trillion yen  ($528 billion) in assets at Norinchukin Trust & Banking Co. in Tokyo and owns residential REITs he declined to name. “If you are looking for mid- to long-term investments, residential  REITs are your best bet because they provide a stable yield.”

Property Revival

REITs pool investor money to buy real estate and are publicly traded like stocks . Japanese apartment REITs gained a risk-adjusted 3.2 percent in the five-year period, followed by offices at 0.9 percent and retail REITs at 2.3 percent. The gains compared with declines of 1.7 percent for 10-year Japanese government bonds and 0.2 percent by the Topix index, a benchmark for domestic stocks. The risk-adjusted return, which isn’t annualized, is calculated by dividing the total return by the volatility, or the degree of daily price variation, giving a measure of income per unit of risk. A higher volatility means the price of an asset can swing dramatically in a short period, increasing the potential for unexpected losses. The ranking compared 39 members of the Tokyo Stock Exchange (1345) REIT index, 44 publicly traded property companies, the stock benchmark and the 10-year JGBs. The 44 companies had an average 0.7 percent risk-adjusted return in the past five years.

Six of the top 10 performers in the ranking were REITS that invest in residential real estate. Daiwahouse had the best total return, with a cumulative gain of 275 percent over the five-year period, before adjusting for price swings. Advance Residence had the fourth-highest total return, at 129 percent, and the fourth- lowest volatility.

Tokyo Apartments

The supply of new apartments in Tokyo this year will reach the highest level since 2007 because of expectations of an economic recovery, according to an estimate by Real Estate Economic Institute Co. in December. The inventory will rise 9.6 percent in 2013 to about 50,000 units, according the Tokyo-based industry researcher.

“The supply of rental apartments is extremely low at the moment,” said Tokyo-based Tomoyuki Kimura, director and general manager of the corporate management department at Advance Residence, Japan’s biggest residential REIT by market value. “A lack of supply in Tokyo has boosted our occupancy rate.” Advance Residence manages 16,127 apartments across 190 buildings and had an occupancy rate of 96 percent as of July 31, according to the company. REITs get most of their profit from rental income, paying the majority of it as dividends. While investors receive a yield that is competitive with bonds, they can also benefit should the value of the underlying properties rise.

Supply Shortage

Residential REITs have an average yield of 4.6 percent, compared with 3.4 percent for office REITs and 4.4 percent for retail REITs that hold shopping malls and retail stores, according to Nomura Securities Co. In a weak market, rents at residential REITs tend to decline less than office REITs and are less likely to suffer from sharp declines in occupancy rates, according to Kimura. Commercial REITs tend to be directly affected by the revenue of tenants, he said. Housing rents in Tokyo’s 23 wards rose or fell as much as five percentage points since 2008 on average, according to Recruit Co., a housing-data provider. Office rents had more than 10 percentage points of fluctuation, according to data compiled by broker CBRE Group Inc.

The supply of new apartments in the city’s metropolitan area averaged less than 43,000 a year since the global financial crisis in 2008. That was about half of the more than 81,000 units in the 10 years to 2007, according to the institute.

Market Rally

REITs still outperformed stocks and bonds in the first three months of this year, as Abe’s push to revive the economy prompted the Bank of Japan to introduce unprecedented asset purchases that fueled a stock market rally. The Tokyo Stock Exchange REIT Index gained a risk-adjusted 2.1 percent in the first quarter, compared with a 1 percent increase for the Topix and a 0.7 percent decline for 10-year government bonds.

Nippon Prologis REIT Inc. , which invests in distribution centers and warehouses, and started trading in the first quarter, was the best performer in the period with a risk- adjusted return of 2.5 percent. Activia Properties Inc. (3279), which invests mainly in commercial and office buildings in the Tokyo metropolitan area, ranked number two, with 2.2 percent. “Office REITs are likely to outperform because they are the only type of asset that tends to benefit when the economy enters into an inflationary stage,” said Tomohiro Araki, a Tokyo-based senior analyst at Nomura. “Having said that, as time goes by, when office rents fail to rise and large tenants continue to move out, people will rediscover the attractiveness of residential REITs.”

First REITs

About 61 percent of Japanese own their own home, based on a survey by the statistics bureau. About 46 percent of people between 35 years and 39 years have their own home, while home ownership for people between 30 years and 34 years is at 30 percent, the data shows. Japan started the REIT market in September 2001 when Nippon Building Fund Inc. and Japan Real Estate Investment  Corp., which both invest in offices, were first listed. The securities were pioneered in the U.S. in the 1960s. Nippon Residential Investment Corp., listed in 2004, was the first residential REIT to go public and was merged with Advance Residence in March 2010, according to the Association for Real Estate Securitization. An index of residential land prices has slid by half from its 1991 peak, according to Japan Real Estate  Institute. The Nikkei 225 Stock Average is about one-third of its peak in 1989, while the 10-year Japanese government bond  yield is 0.62 percent compared with 8.685 percent in 1990.

High Occupancy

Housing starts fell 23 percent in the 10 years to the end of 2012 from the previous decade, according to land ministry data. They gained for a third year in 2012, up 5.8 percent, the fastest pace since 1996. REITs that hold housing properties have 20 tenants on average per building, almost double the average 12 for an office building, according to Nomura. The average occupancy rate of residential REITs was 96 percent as of December, according to Japan’s Investment Trusts Association. It was 95 percent for office buildings.

“The risk of residential REITs not being able to pay their dividend as promised is extremely low because of stable income,” said Nomura’s Araki, who favors residential REITs over all other real estate investments. “So from that angle, the risk of investing in residential REITs is the same as investing in JGBs.”

Tokyo’s Growth

Starts Proceed Investment Corp., a Tokyo-based residential REIT that focuses on cheaper apartments mainly for singles, had an occupancy rate of 97 percent as of October, according to company material. The valuation of the REIT’s properties has increased for two years because rental income helped boost the value of its assets. A lack of new apartments in Tokyo as the population grows will continue to support residential REITs, said Yoji Otani, an analyst at Deutsche Bank  AG in Tokyo. The population in the capital has increased 6 percent to 13.1 million in the past decade, while the number of households has risen 17 percent to about 6.6 million, according to the Tokyo Metropolitan Government (headquarters pictured above). “Even though residential REITs may underperform in the early stage of an economic recovery, they are likely to pick up speed by boosting dividends when the economic growth  accelerates,” Otani said.

_{(Source – “Bloomberg”, Pic – Tokyo Metro Govt Office Buildings / Sjors Provoost )}

15 Feb, 2013 –

Prologis Inc., the leading global owner, operator and developer of industrial real estate, announced that Nippon Prologis REIT, Inc. – a Japanese real estate investment trust – has successfully completed its initial public offering in Japan. Prologis executives participated in a ceremonial bell ringing at the Tokyo Stock Exchange  during the first day of trading for NPR. NPR completed an IPO of 182,350 units, comprised of a domestic offering of 109,410 units (60 percent of units outstanding) and an international placement of 72,940 units (40 percent of units outstanding). Prologis will retain at least a 15 percent ownership interest in NPR.

“We are very pleased with the exceptionally strong interest in NPR’s initial public offering, which highlights the quality of our industry-leading team and portfolio,” said Hamid Moghadam, chairman and CEO, Prologis. “NPR provides investors with a unique investment opportunity and further positions Prologis for sustained growth in Japan.”

Prologis contributed 12 Class-A properties in Japan to NPR (3283:Tokyo Stock Exchange) for initial consideration of approximately JPY 173 billion ($1.9 billion). Inclusive of NPR’s concurrent borrowings, net cash proceeds to Prologis from the sale were JPY 153 billion ($1.7 billion), before the greenshoe option. Prologis intends to use the proceeds primarily for the repayment of debt and future investment in Japan.

NPR has exclusive negotiation rights for eight additional properties owned by Prologis, and will receive pipeline, operational and personnel assistance under a sponsor support agreement. In addition, wholly owned subsidiaries of Prologis will serve as NPR’s property and asset managers. This announcement is not an offer of securities for sale in the United States or any other jurisdiction. Securities may not be offered or sold in the United States unless they are registered or exempt from registration.

About Prologis
Prologis, Inc. is the leading global provider and operator of logistics infrastructure, focused on global and regional markets across the Americas, Europe and Asia. As of Dec. 31, 2012, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 554 million square feet (51.5 million square meters) in 21 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.
_{(Source – “Daily Markets”, Logo – “Brands of the World”)}

13 Feb, 2013 -

Prime Minister Shinzo Abe asked business leaders to raise wages in a rare move reflecting the administration’s resolve to accelerate the battle against chronic deflation. The request was made during talks between the new prime minister and executives of powerful business lobbies, including Hiromasa Yonekura, chairman of Keidanren, which recently suggested at the start of the annual negotiations with labor unions that its member companies will freeze or delay regular wage hikes.

“I hope that companies with improved performances will make efforts to raise the pay” of their employees, Abe told the meeting, which included representatives from the Japan Association of Corporate Executives and the Japan Chamber of Commerce and Industry. Yonekura later told reporters that an increase in salaries would depend on economic conditions. “Better business performances would be reflected in (higher) bonuses and lump sum payments,” he said.

JCCI Chairman Tadashi Okamura said “business confidence at the moment is very strong. We are likely to consider possible measures, including wage hikes.” Abe, who took office in December, has underscored the need to channel recovering corporate profits into households in the form of salary increases, thereby boosting private consumption, while pressuring the Bank of Japan to ease monetary policy more aggressively to support business activity.

In an accord with the government, the BOJ has set a 2 percent inflation target, with experts warning the effects of monetary policy will take time to filter into incomes, and that inflation without pay raises would hurt the public. Economic revival minister Akira Amari also attended the meeting with business leaders. Earlier, Amari said Abe’s economic policy, which has come to be called “Abenomics,” has been welcomed by financial markets. But the minister added that Abenomics can’t be considered sufficient if it doesn’t distribute “real” fruits to the public.

_{(Source – “Japan Times”, Pic – Japanese “Salary Men” / “Diloz”)}

2 Feb, 2013 -

A sharply falling yen and rocketing stock prices, by-products of measures promised by Prime Minister Shinzo Abe  to end economic stagnation, are lifting many Japanese businesses, with many now reporting significantly rosier financial results.

Net profits announced so far by major Tokyo Stock Exchange-listed companies for the April-December period have jumped by nearly 40 percent year on year.

In particular, exporters are reaping the benefits of a sharply weakened yen after a long spell of lackluster sales.

“The yen’s sharp depreciation is a big help to us,” said Ryuji Okuda, the president of Sharp Corp. Similarly, banks and securities houses are reporting improved results amid a general uptick in economic trends and business confidence. On Feb. 1, the yen slid to around 92 yen against the dollar in trading in Tokyo for the first time in more than two and a half years. In mid-November, Japan’s currency traded at around 79 yen to the dollar. It then slipped to the 86 yen range in late December. The benchmark Nikkei average, an average of 225 leading stocks on the Tokyo Stock Exchange, hit 11,191.34 on Feb. 1, its highest level since early 2010.

It was the 12th consecutive week of gains, the longest rally in more than five decades, beaten only by a 17-week rally which began in December 1958. Between mid-November and late December 2012, the Nikkei soared more than 1,700 points. The surge helped banks recover losses in their stock portfolios. It also spurred activity by securities houses. Data from SMBC Nikko Securities Inc. shows that by Jan. 31, a total of 468 companies listed in the blue-chip section of the Tokyo Stock Exchange that settle accounts in March, more than one-third of the group, had released financial results.

Their aggregate net profits were up by 36.3 percent in the nine-month period from April compared with the same period a year earlier. The numbers represent a sharp rebound from the first half of the current fiscal year, in which the group reported average losses of 17.5 percent. What underpins the trend is a phenomenal turnaround in the October-December quarter, when the companies reported a year-on-year increase of 15.3 percent in consolidated operating profits and group net profits were 3.1 times those of a year earlier. Overseas contributing factors include signs of recovery in the U.S. economy and an uptick in other foreign markets.

Exporters have done particularly well. Makers of electronics posted a group net profit for the nine months–despite recording net losses for the first six months of the period. They posted consolidated net profit growth of 2.5 times that of the same period a year earlier. On Feb. 1, Sharp and Panasonic Corp., two electronics manufacturers that posted huge losses in fiscal 2011, reported consolidated operating profits during the third quarter, due in part to their efforts at restructuring.

Net profits by automakers shot up by 88.8 percent in the first three quarters, while those for makers of precision equipment stood at 45.7 percent. If the yen continues to weaken and share prices to rise, analysts say Japanese exporters will acquire an edge over competitors in markets overseas. Kayoko Ota, an analyst at SMBC Nikko Securities, predicted business prospects would improve yet further in coming months.

“The positive impact of a weak yen has not been fully reflected in the recent financial reports,” she said. “It is significant to see a weakening yen and a turnaround in foreign markets.” Last month, the Cabinet Office, in its Monthly Economic Report, revised upward its assessment of the Japanese economy for the first time in eight months. It reported “signs of bottoming out” in vehicle production and personal consumption.

Before, many analysts had been painting a bleak picture of an economy that would continue to slow. They based the belief on monthly economic reports which described a downward trend four months in a row from August through November last year, the first such prolonged decline since the period following the collapse of U.S. investment bank Lehman Brothers in autumn 2008.
_{(Source – “Asahi Shimbun, Japan”, Pic – Japanese Yen/ “EO Kenny“)}

1 Feb, 2013 -

The year 1959 was in many ways remarkable. America granted Alaska and Hawaii statehood, Fidel Castro took power in Cuba and Singapore gained its independence from Britain. The Barbie doll and pantyhose went on sale for the first time; Miles Davis recorded “Kind of Blue” at a New York studio.

Japanese prime minister Shinzo Abe has galvanized markets by encouraging bold monetary measures to beat deflation, and hefty government spending to jump-start the economy . Until Friday, 1959 was also the last time the Nikkei 225 stock index rallied for 12 straight weeks, driven by the quickening pace of Japan’s postwar economic boom. Now the index has repeated that feat, rising 0.47 percent to 11,191.34 on Friday to finish the week up 2.5 percent. The Japanese business media have been quick to jump on the historical tidbit, trumpeting the Nikkei’s best weekly run in 54 years. The rally in 1959 actually lasted 17 weeks.

This time around, the Nikkei’s rally was motivated by the new Japanese prime minister, Shinzo Abe. Mr. Abe has galvanized markets by encouraging bold monetary measures to beat deflation, and hefty government spending to jump-start the economy. The result has been a weakening of the yen by 15 percent over the past three months, a boon for Japanese exporters, and a 25 percent surge in the stock market over the same period.

“The expectations pinned on Prime Minister Abe’s drive to tackle deflation and the strong yen are the driving force pushing stocks toward this postwar record,” the Nikkei newspaper said. The market’s climb comes despite lackluster earnings by Japanese companies. Of the 54 companies on the Nikkei index that had posted results for the October-to-December quarter by Thursday, nearly two-thirds missed market expectations, according to Thomson Reuters StarMine, the investment research service. And for now, households have remained cool to the market buzz. Japanese household spending fell 0.7 percent in December from a year earlier in price-adjusted real terms, government data released Friday showed.

Nevertheless, Mr. Abe’s policies, dubbed “Abenomics,” are having “a positive psychological effect” on investors and corporate executives, Yasushi Hoshi, director of capital markets at the Daiwa Institute of Research, wrote in a note published Friday. “And the exchange rate and stock prices, if sustained, could themselves push up corporate earnings, leading to better corporate and consumer sentiment in a positive cycle.”

There are already signs that the weaker yen is bolstering some earnings The video game maker Nintendo raised its profit forecast for its current financial year on Thursday even as the company reported disappointing sales of its game consoles. Overall investor optimism is giving companies the benefit of the doubt. Honda Motor surprised investors Thursday by trimming its profit outlook, citing sluggish demand in China and Europe, but they still snapped up Honda shares early on Friday, and the stock finished the day 0.3 percent higher. Still, there are budding concerns that Mr. Abe’s drive will bring about a dangerous bubble. “The results in the near term are an investment boom and bubble, but the longer-run consequences could be soaring inflation and fiscal crisis, followed by lengthy economic stagnation,” Ryutaro Kono, chief economist for Japan at BNP Paribas Securities, wrote in a recent report. From a historical perspective, the Nikkei index and other asset prices remain far below the heights seen during Japan’s last economic bubble, in the late 1980s. For many global investors, the recent rally has only begun to reverse a slump in Japanese equities that has taken them to levels seen as ridiculously low. Shares on Tokyo’s broader Topix index long traded below their book value, meaning that prices were less than what the companies would fetch if they were dissolved and their parts sold off.

Now, foreign investors are leading the charge, having poured a net ¥248.6 billion, or $2.7 billion, into Japanese stocks in the fourth week of January alone. “We think there is latent demand because supply in this space has dwindled over the years and investors are thinking about coming back,” Patric de Gentile-Williams of Financial Risk Management, told the Hedge Funds Review on Wednesday, after making a $25 million investment in a Japanese equity fund run by Arena Capital Management. “If the new prime minister’s actions have a big effect, they might come back in a big way.”

Is Japan, then, on course for a wider recovery? Not so fast, Yusuke Shimoda, an economist at the Japan Research Institute in Tokyo, wrote in a note to clients this past week. Japan’s recovery could sputter, he said, if the government cannot match its asset-inflating moves with growth strategies for the real economy. “It will be critical to put a growth strategy in action that will start a self-sustained recovery,” Mr. Shimoda said.

Nevertheless, Japan forecast Monday that its economy would grow by 2.5 percent in the fiscal year that starts in April, raising an earlier projection of 1.7 percent — an impressive rate for the world’s third-largest economy after the United States and China. Impressive, that is, unless investors look back to Japan’s rate of gross domestic product growth in 1959, which was 12.1 percent.

_{(Source – Hiroko Tabuchi / “New-York Times” , Pic – Up Arrows / “FutUndBeitl“)}

3 Mar, 2013 -

Japanese stocks punched higher in early Monday trade, with reflationary hopes sending the yen lower over the weekend, while real-estate shares extended their rally from the end of the previous week.

The Nikkei Stock Average advanced 1% to 11,721.73, with the Topix up 1.1%, as the dollar traded above 93.50 yen after gains on Friday. Real-estate names, which had enjoyed gains last week after strong land-price data, were up sharply again Monday.

Mitsui Fudosan Co. and Sumitomo Realty & Development Co. each jumped 4.2%, and Mitsubishi Estate Co. surged 4.5%, though home builder Sekisui House Ltd. saw a more modest 1.7% improvement. The weaker yen also fed gains to major exporters, as Sony Corp. jumped 3.2%, Bridgestone Corp. climbed 2.3%, Fujitsu Ltd. rose 1.7%. On the downside, losses late last week for crude-oil futures weighed on the energy sector, as Inpex Corp. lost 0.8%, and JX Holdings Inc. fell 0.5%.

_{(Source – “Market Watch“, Editing – “NTI“, Pic – Tokyo Metro Govt Office Bldgs / Sjors Provoost)}

31 Jan, 2013-

Japanese industrial production rose 2.5% in December from the previous month, the Ministry of Economy, Trade and Industry said Thursday, in a sign that Japan’s economy may be starting to recover from last year’s downturn. The rise was smaller than expected by economists surveyed by Dow Jones Newswires and the Nikkei, who estimated on average that industrial production would increase 4.0% from the prior month after adjustment for seasonal factors.

The ministry said the increase in industrial output came on the back of rises in electric machinery, general machinery and transport machinery production. The ministry also upgraded its assessment, saying that signs of an end to falling industrial production are visible. Economists have been looking to see if the industrial production number, one of the early indicators of how the economy is faring each month, would show whether Japan has pulled out of last year’s slump. The gain for December comes after a revised fall of 1.4% for November.

There have been signs that Japan’s export-dependent economy has bottomed out with the government raising its view on the economy in January for the first time in eight months. The government said that the yen’s fall since mid-November and a rise in the stock market has helped to put the economy on a recovery path . The ministry also said it expects output to rise 2.6% in January from December and then increase 2.3% in February, based on surveys of companies.

_{(Source – “Euro Investor“, Pic – Tomioka Silk Mill, Japan / “al-hayat“)}

28 Jan, 2013 -

Toyota Motors sold a record 9.75 million vehicles last year, the company said, moving past General Motors and Volkswagen to reclaim its title as the world’s top-selling automaker in 2012. G.M., which held the top spot in 2011, sold 9.29 million vehicles last year. It had been the top-selling automaker for decades before losing its lead to Toyota in 2008.

Volkswagen sold 9.1 million vehicles last year, a record for the German automaker, which has expanded its presence in emerging markets. VW also outsold Toyota in 2011. Toyota estimated in December 2011 that it sold 9.7 million vehicles for the year, and final figures released were slightly higher.

By recovering its No. 1 title, Toyota cements a strong comeback from several years of tumbles. A sharp slowdown in exports during the global economic crisis led to the automaker’s biggest loss in decades while controversy over its handling of recalls greatly tarnished its image for quality and reliability. In 2011, the earthquake and tsunami in Japan, as well as widespread flooding in Thailand later that year, disrupted production, weighing on sales in important markets like the United States and pushing Toyota to No. 3 in global sales.

Toyota recovered in 2012, however, as production rebounded and the automaker went on an offensive to win back market share.  Toyota sales in the United States surged 27 percent, to 2.08 million vehicles. In Japan, sales rose 35 percent, to 2.41 million vehicles, helped by government incentives for fuel-efficient cars. Those increases were enough to offset a decline in sales in China, where Japanese businesses have been hurt by consumer boycotts stemming from a bitter territorial dispute between the two countries. In Europe, sales of Toyota cars rose by 2 percent.

_{(Source-”N.Y. Times“, Pic-”DanielCTW’s Photo Stream ”, Editing-”Nippon Tradings“)}

27 Jan, 2013 –

China and Japan  sought to cool down tensions over a chafing territorial dispute on Friday, with Communist Party chief Xi Jinping telling an envoy from Japanese Prime Minister Shinzo Abe that he was committed to developing bilateral ties. Xi will consider holding a summit meeting with Abe, Natsuo Yamaguchi, a senior lawmaker and head of the junior partner in Japan’s ruling coalition, told reporters after his talks with the Chinese leader.  The meeting came as China took the dispute over a series of uninhabited islands to the United Nations (Illustration pic, above – “A Modest Proposal” / “Sparklig“). It was not immediately clear if the UN involvement would increase the likelihood the row would be resolved peacefully. But launching an international legal process could reduce the temperature for now.

At China’s request, the United Nations will, later this year, consider the scientific validity of a claim by Beijing that the islands, called the Diaoyu in Chinese and the Senkaku by Japan, are part of its territory. Japan says the world body should not be involved. “The China government’s policy to pay close attention to China-Japan relations has not changed,” Xi told Yamaguchi at the meeting in Beijing’s Great Hall of the People, according to a statement on the Chinese foreign ministry’s website. But he added: “The Japanese side ought to face up to history and reality, take practical steps and work hard with China to find an effective way to appropriately resolve and manage the issue via dialogue and consultations.” China’s media have portrayed the territorial dispute as an emotional touchpoint for Chinese people that evokes memories of Japan’s 1931-1945 occupation of parts of the mainland. Chinese textbooks, television and films are full of portrayals vilifying the Japanese. Relations between the countries, the world’s second- and third-largest economies, plunged after the Japanese government bought three of the islands from a private owner last year, sparking widespread, violent anti-Japan protests across China. Some Japanese businesses were looted and Japanese citizens attacked. Yamaguchi handed a letter from to Xi from Abe, who wrote that he hoped to develop peaceful relations between the two countries, Yamaguchi said.

Japan takes a broad view of the issue and believes tensions can be resolved between the two countries, he told reporters before returning to Tokyo after a four-day visit. “Japan wishes to pursue ties with China while looking at the big picture,” Yamaguchi said he told Xi, who is set to take over as China’s president in March. “I firmly believe our differences with China can be resolved,” Yamaguchi said, adding that he did not directly discuss the islands issue with Xi. “We agreed that it is important to continue dialogue with the aim of holding a Japan-China summit between the two leaders,” he added, though no specific details were given. “Secretary Xi said he will seriously consider a high-level dialogue with Japan.” While Yamaguchi has no formal position in the government, he is leader of relatively dovish New Komeito party, a coalition partner of the Liberal Democratic Party that was voted to power in December. Taking the issue to the United Nations is an effort to underscore China’s legal claim to the islands, but also a way to reduce tensions in the region, said Ruan Zongze, deputy director of the China Institute of International Studies, a think-tank affiliated with the Chinese Ministry of Foreign Affairs.

“It’s two things: it’s part of the legal efforts, and we want to exert our legal claim in a less confrontational way,” Ruan said. “We don’t want to see escalation, particularly with fighter jets. That would be very dangerous from any point of view.” In a submission to the UN Commission on the Limits of the Continental Shelf, China claims that the continental shelf in the East China Sea is a natural prolongation of China’s land territory and that it includes the disputed islands. Under the UN convention, a country can extend its 200-nautical-mile economic zone if it can prove that the continental shelf is a natural extension of its land mass. The UN commission assesses the scientific validity of claims, but any disputes have to be resolved between states, not by the commission.

_{(Source-”Business Recorder“)}

25 Jan, 2013 -

Japan, printing money and bolstering national pride, swept past the U.K., which is trying to implement an austerity program and loosen European ties, in a ranking of the best countries to do business compiled by Bloomberg.

Japan rose four places to third, behind the U.S. and Hong Kong, which led for a second straight year, in an index based on six criteria including the degree of economic integration and readiness of the local consumer base. Japan’s advance coincides with a 14 percent slide in its currency against the dollar in the past year that has bolstered its export competitiveness.

Prime Minister Shinzo Abe has called for unlimited money- printing  and a doubled central bank inflation target to help revive the world’s third-biggest economy that was overtaken by China in 2010. He also plans to adopt a more assertive approach in regional disputes, particularly with emerging superpower China.

“There’s been a huge groundswell for change in Japan  to extract the country from its malaise of the best part of 20 years and Abe has been elected with an agenda to revitalize,” said Martin Whetton, interest-rate strategist for Australia at Nomura Holdings Inc. in Sydney. “In contrast, the U.K. is close to a triple-dip, with high taxes and uncertainty around its role in Europe.”

Survey Components

Bloomberg Rankings measured nations on a scale of zero to 100 percent based on six factors: the costs of setting up business; hiring and moving goods; the degree of economic integration; less tangible costs such as inflation and corruption; and the readiness of the local consumer base, a category that includes the size of the middle class, household consumption and gross domestic product per person.

Hong Kong (HSI) scored 79.6, eclipsing the U.S.’s 77 and Japan’s 75.6. Germany was the leader on the basis of economic integration, while the United Arab Emirates won on the movement of goods. Luxembourg led on less-tangible costs. Hong Kong was deemed best for setting up a business.

Japan scored highest for the price of labor and materials because its compensation as a percentage of total expenses was only 6.9 percent, compared with 11.9 percent in the U.S. and 23 percent for Hong Kong.

Canada Rises

Canada, where unemployment reached a four-year low last month, was among the gainers, rising six places to sixth-equal with Australia. Switzerland, by contrast, fell to 17th, level with the U.A.E., which rose seven spots. The Swiss central bank introduced a currency cap of 1.20 francs per euro in September 2011 to help exporters and fend off the threat of deflation.

A quarterly survey on Jan. 17 of investors, analysts and traders who are Bloomberg subscribers showed they are the most bullish on Japan’s markets in more than three years and confident that Abe will weaken the yen to boost exports.

Japan’s currency is heading for an 11th straight weekly decline, the longest on record, according to data compiled by Bloomberg. It traded at 90.65 as of 8:41 a.m. in Tokyo.

Respondents who see Japan offering the best opportunities worldwide over the next year rose to 21 percent this month from September’s 5 percent, the survey showed. Fifty-four percent said they’re more optimistic than pessimistic on how Abe’s policies will affect Japan’s investment climate, up from 21 percent two months ago, when subscribers were asked about his predecessor, Yoshihiko Noda.

 Japan’s Stocks

The Nikkei 225 Stock Average increased  for 10 straight weeks through Jan. 18, the longest rally since 1987. Goldman Sachs Group Inc., Bank of America Corp. and Nomura are predicting Japanese stocks will extend gains.

Japan still faces numerous challenges. A territorial dispute with China over eight uninhabited islands in the East China Sea has prolonged Japan’s recession and hurt a trade relationship of more than $300 billion. China dropped five places in the business ranking, to 24th.

_{(Source-”Bloomberg“, Pic-Japan Flag / Urawa’s Photo Stream)}

23 Jan, 2013 -

Japan, the nation that pretty much invented quantitative easing, is now following in Ben Bernanke’s footsteps, launching an open-ended asset purchase plan and a 2% inflation target to fight the steady drop in prices that have plagued the world’s third largest economy for twenty years.  The Bank of Japan (BoJ) is joining others in what could be dubbed a new era for central banks, as ailing economies and massive debt loads have eroded the barrier of independence and essentially pushed monetary policymakers into trying to spark growth via stimulus, as the debate on the effectiveness of those policies ranges on.

The market’s verdict on whether the policy will work has been mixed.  While equities mounted an impressive rally and the yen fell dramatically in anticipation to the decision, momentum fizzled after the announcement, as investors were disappointed with the magnitude of the BoJ’s latest round of QE , expecting policymakers to do more.

Before becoming Prime Minister for a second time last year, Shinzo Abe promised the electorate he would push for bigger stimulus programs and pressure the BoJ to do more to revive the economy.  Markets believed him, with Japanese equities gaining nearly 20% in the third quarter and the yen weakening 12% both against the U.S. dollar and on a trade weighted basis.

And Abe delivered , to a certain extent.  After pressuring Governor Masaaki Shirakawa (pictured above), the Bank of Japan came through, setting a formal 2% inflation target (CPI contracted 0.2% in 2012) and unveiling a new open-ended asset purchase program (QE).  Yet markets were unimpressed as Japanese equities dropped and the yen  fell 1.5% against the greenback after the announcement.  And all of this despite Abe’s recent plans to inject 10.3 trillion yen ($115 billion) into the economy and rumors of a foreign bond buying fund of about $600 billion to buy U.S. Treasuries and other sovereign debt.

For markets that were expecting a new BoJ to aggressively attack deflation with a bazooka, Tuesday’s decision was a downer.  Shirakawa offered no net new asset purchases in 2013 (they are currently buying 36 trillion yen a month, or about $410 billion), while the open-ended 2014 program will lead to a net increase in the rate of purchases of 10 trillion yen ($110 billion, or 2.1% of GDP) a month; the BoJ hasn’t committed to further asset purchase expansion in 2015, despite expecting 2014 CPI to rise only 0.9%, well below the 2% target.

Not only will the rate of asset purchases slow in 2014 and flat-line a year after that, the BoJ also failed to expand its “risky asset purchases” (which include exchange-traded funds and real-estate investment trusts) and voted down a possibly maturity-extending Japanese-Twist.

And while yes, markets were disappointed, they had largely priced in the move, which in turn led to the mild sell-off.  The smart money had anticipated the yen’s trajectory and gradually faded it in the first days of 2013.  Nomura’s currency expert Jens Nordvig told Forbes last November he believed the yen could fall as much as 20% this year; in a recent note, Nordvig suggested taking profits on USD-JPY longs and preparing for volatile, range-bound trading going forward.

The trade isn’t set to unwind yet, though.  Speculative yen positions are still very much in place, and PM Abe is making a push for more easing.  His plan to spark growth, dubbed Abenomics, is based on supporting a weaker yen and ramping up fiscal stimulus.  Abe is set to make the BoJ more dovish over the next few months, with Governor Shirakawa’s term set to end in April, and his deputies Yamaguchi and Nishimura seeing their terms expire on March 19.  As Barclays’ economics research team put it, the ball is on the government’s, more specifically on Abe’s, court.

Over the past few years, weakness in Japan hasn’t done much to help U.S. equities.  In their latest sales numbers, McDonald’s noted “ongoing weakness in Japan” that offset its positive results in Australia, while Nike has seen recent growth in their footwear and apparel sales in the world’s third largest economy , but declines in equipment revenues.  Even on the energy front, despite the closing of nuclear power plants, Exxon Mobil has acknowledged the fragility of the Japanese economy. Abe will certainly keep the heat high on the BoJ and on his government to aggressively stimulate the economy and move toward the 2% inflation goal.  Further easing will definitely be discussed in the coming BoJ meetings, but it appears far-fetched to expect more while Shirakawa is still Governor.  Nomura’s research team suggests keeping an eye out for the government’s growth policies and for any signs that Japanese investors are ramping up their sales of yen-denominated savings in the face of currency weakness.

_{(Source – “Agustino Fontevecchia – Forbes“, Pic – “NBC News“)} 

7 Jan, 2013 -

The new Japanese government is considering programs worth ¥433 billion this week to bolster businesses, including help for them in buying foreign companies, under a draft economic stimulus package viewed by Reuters. The package of nearly $5 billion is being studied with Prime Minister Shinzo Abe making economic revival his top priority after his Liberal Democratic Party won elections last month. Mr. Abe wants to combine aggressive monetary easing — manipulation of interest rates and money supply — with government spending to encourage investment and growth.

The Development Bank of Japan, a state-backed lender, would administer a ¥150 billion lending program to encourage companies to develop new technologies and collaborate on new business lines, according to the draft proposal. The stimulus package would also establish a ¥200 billion fund at the Japan Bank for International Cooperation, another state-sponsored lender, to encourage foreign mergers and takeovers. The draft showed an additional ¥83 billion in loan guarantees and low-interest-rate loans for small businesses.

The government would set aside ¥100 billion for the lending program at the Development Bank of Japan in a supplemental budget; the lender would use its own capital for the remaining ¥50 billion. Government spending on the program at Japan Bank for International Cooperation would total ¥70 billion. Lending from that bank and private-sector banks would account for the remaining ¥130 billion. A Liberal Democratic Party subcommittee approved the draft Monday, and it could be approved by the cabinet as soon as this week.

The total size of the government’s stimulus package could be about ¥10 trillion, with half devoted to public works, a person close to Mr. Abe said last month; the person was not authorized to speak to the news media. The draft seen Monday did not contain any details of plans for public works spending. Senior members of the Liberal Democratic Party have said they want to spend some of the stimulus to repair roads, tunnels and schools, raising concerns that the party is falling back on the excessive public works spending that was the hallmark of its more than nearly continuous governance of the country, lasting half a century.

Mr. Abe’s spending promises have raised concerns that the public debt burden in Japan, already the worst among major economies, could increase further, and some economists say structural changes might have a bigger effect after years of stop-start growth. Mr. Abe has instructed the finance minister to disregard borrowing limits set by the previous government.

_{(Source- “NY Times“, Editing- “NTI“, Pic-Japanese Yen/ “EO Kenny“)}

7 Sep, 2012 -

Australian developers Goodman Group announced a US$1 billion development partnership on Friday. Goodman has established the Goodman Japan Development Partnership, a 50/50 venture between Goodman and the Abu Dhabi Investment Council. The partnership will be focused on developing facilities in the major logistics markets of Japan and will launch with an initial investment in three super prime development projects in key markets Tokyo Bay and Osaka. The developments have an estimated end value in excess of JPY55.5 billion (US$700 million).

Group CEO Greg Goodman said the announcement demonstrates the Group’s successful capital partnering approach with major global investor groups. “The new development partnership provides us with significant capacity to accelerate our expansion plans in Japan in a prudent and measured manner,” he said.

Goodman Group is the largest industrial property group listed on the Australian Securities Exchange and one of the largest listed specialist fund managers of industrial property and business space globally.

_{(Source – “Real Commercial, Australia“, Pic – Port or Kashii, Fukuoka , Japan / Richard West)}