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from Breakingviews:

Blame Japan’s debt on companies, not the state

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Japan’s government is up to its neck in debt. That, however, is not because the government has been overly profligate, but because Japanese companies have been deleveraging for a long time. If Prime Minister Shinzo Abe’s policies revive private investment, the government’s track record suggests it will tighten its belt.

In any economy, if the private sector increases savings, the government must borrow, or the current account surplus must widen. In Japan’s case, deflation has prompted companies to cut back on new investment, while the state has picked up the slack. Between 1998 and 2012, Japan’s corporate sector saved 373 trillion yen ($3.6 trillion, at current exchange rates). Over the same period, the government accumulated a 446 trillion yen deficit. The difference between the two — the extra fiscal support for the economy — has thus been just 73 trillion yen, or 1 percent of annual GDP over 15 years. That hardly smacks of budgetary recklessness.

If Abenomics succeeds in boosting corporate investment, then, the government will have to force itself to live within its means. History suggests both are possible. The quarterly pace of fixed investment by Japanese companies jumped 16 percent between end-2003 and end-2007. Over the same period, the government pruned the deficit with the help of a 28 percent reduction in public works spending.

from Global Investing:

The only game in town

The extent of the surge to Japan by equity investors is written in sparkly 50-foot-high neon letters by the latest flows data out from Lipper.

We all know that Abenomics has, thus far, cast a spell over markets; the Nikkei is up about 80 percent since the middle of November, when Shinzo Abe first started looking like a bona fide challenger to win power. But it is still startling to see how flows into Japan have dominated investment behaviour.

from Photographers' Blog:

Seaside nuclear power

Omaezaki, Japan

By Toru Hanai

Chubu Electric Power Co.'s Hamaoka Nuclear Power Station in Japan is located at water level next to a beach. It is also widely reported to be one of the world's most dangerous nuclear plants as it sits close to a major fault line - not unlike the one that caused the Fukushima nuclear disaster.

I had an offer of an exclusive tour of Chubu Nuclear Power Station where an 18-meter (60 ft) high and 1.6 km (1 mile) long tsunami defense wall has been built at a cost of $1.3 billion.

from Anatole Kaletsky:

The radical force of ‘Abenomics’

Japan's Prime Minister Shinzo Abe in the cockpit of T-4 training jet at the Japan Air Self-Defense Force base in Higashimatsushima, Miyagi prefecture, May 12, 2013. REUTERS/Kyodo

'The 3.5 percent gross domestic product growth announced by Tokyo Wednesday suggests that Japan may be the fastest-growing economy in the G7. Since the Tokyo stock market hit bottom exactly six months ago, the Nikkei share index has soared almost 80 percent. Meanwhile, the yen has experienced its biggest six-month move against the dollar. All these events appear linked to the election of Shinzo Abe and the regime he has installed at the Bank of Japan.

from Global Investing:

Weekly Radar: Draghi returns to London

ECB chief Mario Draghi returns to London next week almost 10 months on from his seminal “whatever it takes” speech to the global financial community in The City  – a speech that not only drew a line under the euro financial crisis by flagging the ECB’s sovereign debt backstop OMT but one that framed the determination of the G4 central banks at large to reflate their economies via extraordinary monetary easing. Since then we’ve seen the Fed effectively commit to buying an addition trillion dollars of bonds this year to get the U.S. jobless rate down toward 6.5%, followed by the ‘shock-and-awe’ tactics of the new Japanese government and Bank of Japan to end decades.

And as Draghi returns 10 months on, there's little doubt that he and his U.S. and Japanese peers have succeeded in convincing financial investors of central bank doggedness at least. Don't fight the Fed and all that - or more pertinently, Don't fight the Fed/BoJ/ECB/BoE/SNB etc... G4 stock markets are surging ever higher through the Spring of 2013 even as global economic data bumbles along disappointingly through its by now annual ‘soft patch’.  Looking at the number tallies, total returns for Spanish and Greek equities and euro zone bank stocks are up between 40 and 50% since Draghi's showstopper last July . Italian, French and German equities and Spanish and Irish 10-year government bonds have all returned about 30% or more. And you can add 7% on to all that if you happened to be a Boston-based investor due to a windfall from the net jump in the euro/dollar exchange rate. What’s more all of those have outperformed the 25% gains in Wall St’s S&P 500 since then, even though the latter is powering to uncharted record highs. And of course all pale in comparison with the eye-popping 75% rise in Japan’s Nikkei 225 in just six months!! Gold, metals and oil are all net losers and this is significant in a money-printing story where no one seems to see higher inflation anymore.

from Breakingviews:

Japan’s yield spike is no canary in the debt mine

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

The recent spike in Japan’s bond yields is not a canary in the country’s debt mine. Though the yield on 10-year government bonds has almost doubled since the Bank of Japan announced its aggressive money-printing pledge on April 4, it’s still less than 0.9 percent. Before the 2008 financial crisis, yields were twice as high.

from Breakingviews:

Dan Loeb‘s breakup plan deserves Sony’s ear

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Dan Loeb is taking Japan’s economic renaissance at face value: the hedge fund manager wants Sony to spin off its entertainment arm. Though activists rarely prevail in Japan, Loeb’s idea may have merits. The electronics giant should take him seriously.

from Breakingviews:

Abenomics pulls Japan from its post-Lehman slump

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Prime Minister Shinzo Abe’s policies have beaten back the Japanese economy’s post-Lehman blues. Breakingviews' Abenomics Index was at its highest level in March since September 2008. And that was before the Bank of Japan launched its bold money-printing pledge.

from Breakingviews:

Three-digit yen no longer a one-way bet

By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The yen is no longer a one-way bet. The Japanese currency has slumped to 100 against the dollar for the first time in four years. That’s a 16 percent slide since Shinzo Abe’s landslide election victory in December. At the time, Breakingviews predicted his victory would herald a three-digit yen. But there are good reasons to be sceptical about a further decline.

from Breakingviews:

Ailing South Korea needs monetary remedy

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

The Bank of Korea is making a big mistake by not cutting interest rates more aggressively. A weaker Japanese yen and tepid global demand are squeezing the country’s exporters from Hyundai Motor to steelmaker Posco. Though demand from China is still growing, shipments to Europe are falling, while those to the United States have stalled (See graphic).

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