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from Breakingviews:
Nomura resignations pave way for the Lehman unwind
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The resignations of Nomura’s two top executives may close the chapter on the Japanese firm’s plan to become a global player in investment banking. Departing Chief Executive Kenichi Watanabe and Chief Operating Officer Takumi Shibata led the opportunistic swoop on bankrupt Lehman Brothers in 2008. They are leaving mainly due to an unrelated insider trading scandal. But Lehman isn’t working, and the pair’s replacements have a chance for a dignified unwind.
Dismal quarterly numbers provide the immediate pretext for a strategic U-turn. Nomura’s wholesale bank, which includes the trading and corporate finance acquired from Lehman, reported a pre-tax loss in the April-to-June quarter, and revenues fell 24 percent on the previous three months. That came on top of a bad quarter for the core Japanese brokerage business, where commission income fell 15 percent quarter on quarter. Nomura’s overall earnings were down 91 percent in the period.
The whole industry is suffering, but Nomura has more to prove. Alarmingly, fee income in investment banking was at its lowest since the Lehman deal. Nomura still rules in Japan, but strip out Japanese equity issues and the firm would have ranked 27th globally - below Qatar National Bank - according to Thomson Reuters data for the year to date. The group made a bigger pre-tax profit in the quarter from “other” activities like real estate, and accounting gains in the value of its own debt, than from brokerage and banking.
from Expert Zone:
Fukushima disaster report: relevance of cultural traits
(The views expressed in this column are the author's own and do not represent those of Reuters)
The first report of the three major investigations commissioned by the Japanese government into the Fukushima nuclear disaster of March 2011 was released in Tokyo on Thursday. The findings of the investigation, chaired by Dr. Kiyoshi Kurokawa challenged the dominant assumption that this tragedy unfolded due to a confluence of natural calamities of tectonic proportion -- namely a tsunami and an earthquake -- and concluded that Fukushima was alas, ‘man-made’ and occurred due to "a multitude of errors and wilful negligence" that implicated the government, safety regulators and the operator of the nuclear plant.
from Breakingviews:
Japan needs more than apologies on insider trades
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Handing responsibility for the sale of a $6 billion stake in Japan Tobacco to Nomura Holdings’ rivals after the bank apologized for leaking earlier share sales seemed like a rebuke from Japan’s government. But Nomura probably lost fair and square. Either way, though, Tokyo needs to make such leaks illegal and attempts to profit on them much more painful.
from Breakingviews:
Japan’s retiree raid augurs political paralysis
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Japanese Prime Minister Yoshihiko Noda has wrangled a deal with the opposition to double the consumption tax and whittle down government debt, which is already double GDP. On paper, it’s a good start. In Japan’s toxic political environment, though, it’s a big risk. Because the tax hike will hit the country’s growing population of retired voters, the bill’s passage - or indeed failure - could wind up costing Noda his job. That would derail other reforms needed to avoid a sovereign debt crisis.
from MacroScope:
Euro zone may struggle with its own Lost Decade
Additional Reporting by Andy Bruce and polling by Rahul Karunakar and Sumanta Dey.
As Europe’s crisis drags on, the prospect of a Japanese-style lost decade of economic malaise is becoming increasingly real, according to a new poll. Half of the bond strategists and economists surveyed by Reuters are now expecting just such an outcome.
from Global Investing:
Three snapshots for Thursday
Fears that Athens is on the brink of crashing out of the euro zone and igniting a renewed financial crisis have rattled global markets and alarmed world leaders, with Greece set to figure high on the agenda at a G8 summit later this week. This chart shows the impact on assets since the Greek election:
Euro zone banks now account for only 8% of total euro zone market value - they were over over 20% of the market in 2007:
from Breakingviews:
Asia’s bonds look shinier as Europe and China slump
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Asian bonds seem likely to gain from growing anxiety about Europe and China. The region’s robust finances have made its sovereign debt a safe haven as larger economies sputter. An indiscriminate sell-off would hurt everyone, but Indonesia, Japan and the Philippines all have qualities that should give them greater resilience.
from Global Investing:
Big Fish, Small Pond?
It's the scenario that Bank of England economist Andrew Haldane last year termed the Big Fish Small Pond problem -- the prospect of rising global investor allocations swamping the relatively small emerging markets asset class.
But as of now, the picture is better described as a Small Fish in a Big Pond, Morgan Stanley says in a recent study, because emerging markets still receive a tiny share of asset allocations from the giant investment funds in the developed world.
from Breakingviews:
Samsung moves on from Japan to nibble at Apple
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Japanese may have pioneered the model of a vertically integrated electronics manufacturer, but Samsung looks to have perfected it. The Korean company started by pulling apart Japanese TV sets, then reverse-engineered the manufacturers’ business model. By avoiding their missteps, it’s driving them out of TVs and carving up the smartphone market with Apple. Now, as more business is coming from emerging markets, Apple needs to watch out for Samsung’s still-growing appetite.
from Global Investing:
The “least worst” option?
Western governments saddled with mountainous debts will "repress" creditors and savers via banking regulation, capital controls, central bank bond buying and currency depreciation that effectively puts sovereign borrowers at the top of the credit queue while simultaneously wiping out real returns for their bond holders. So says HSBC chief economist Stephen King in his latest report this week called "From Depression to repression".
Building on the work of U.S. economist Carmen Reinhardt and others, King's focus on the history of heavily indebted governments applying "financial repression" to creditors arrives at several interesting conclusions. First, even though western governments appeared successful in using these tactics to reduce massive World War Two debts alongside brisk economic growth during the 1950s and 1960s, King argues that the debt was cut mainly by the impressive economic growth and tax revenues during that "Golden Age" - and this was mostly down to the once-in-a-century period of relative peace that involved unprecedented integration and cooperation among western governments also engaged in a Cold War with the Soviet Union. Compared to this boost, the financial repression was a "sideshow", he reckons. To show that, he applies the interest rate and inflation conditions of the 1950s and 1960s to the current US government debt trajectory and then compares the growth scenario back then with the one faced now. The graphic is revealing.
So, for repression to work, it needs to generate higher growth first. And despite lower real rates today than in the days of Mad Men, that seems not to be the case.
