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from Global Investing:

Less yen for carry this time

The Bank of Japan unleashed its full firepower this week, pushing the yen to 3-1/2 year lows of 97 per dollar.  Year-to-date, the currency is down 11 percent to the dollar. But those hoping for a return to the carry trade boom of yesteryear may wait in vain.

The weaker yen of pre-crisis years was a strong plus for emerging assets, especially for high-yield currencies. Japanese savers chased rising overseas currencies by buying high-yield foreign bonds and as foreigners sold used cheap yen funding for interest rate carry trades. But there's been little sign of a repeat of that behaviour as the yen has fallen sharply again recently .

Most emerging currencies are flatlining this year and some such as the Korean won and Taiwan dollar are deep in the red. The first reason is dollar strength of course, but there are other issues. Take equities -- clearly some cash at the margins is rotating out to Japan, where equity mutual funds have received $14 billion over the past 16 weeks.  While the Nikkei is up 21 percent, Asian indices are broadly flat. In South Korea whose auto firms such as Hyundai and Kia compete with Japan's Toyota and Honda, shares are bleeding foreign cash. The exodus has helped push the won down 5 percent to the dollar in 2013.

Second, the much-vaunted outflows from Japan have not yet lived up to expectations.  JPMorgan tracks Japanese investment trusts with $67 billion in assets but says only $2.3 billion have flowed to emerging bonds this year, all of it in January and February.

from Breakingviews:

Japanese economy needs nuclear second chance

By Christopher Swann

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

Japan needs to give nuclear energy a second chance. Prime Minister Shinzo Abe’s goal of weakening the yen will make electricity even pricier in a country that imported over 80 percent of its energy even before the Fukushima disaster in 2011.

from Breakingviews:

Kuroda does what he can for BOJ’s inflation goal

Photo

By Andy Mukherjee

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

The Bank of Japan’s new chief has dumped his predecessor’s timid script. Haruhiko Kuroda has crafted an ambitious new plan to end the country’s chronic deflation.

from Global Investing:

European banks: slow progress

The Cypriot crisis, stemming essentially from a banking malaise, reminds us that Europe's banking woes are far from over. In fact, Stephen Jen and Alexandra Dreisin at SLJ Macro Partners posit in a note on Monday that five years into the crisis, European banks have barely carried out any deleveraging. A look at their loan-to-deposit ratios  (a measure of a bank's liquidity, calculated by dividing total outstanding loans by total deposits) remain at an elevated 1.15. That's 60 percent higher than U.S. banks which went into the crisis with a similar LTD ratio but which have since slashed it to 0.7.

It follows therefore that if bank deleveraging really gets underway in Europe, lending will be curtailed further, notwithstanding central bankers' easing efforts. So the economic recession is likely to be prolonged further. Jen and Dreisin write:

from Global Investing:

After disappointing start to 2013, how will hedge funds catch up?

Despite the early-year rally in equity markets, some hedge funds seem to have had a disappointing start... yet again.

JP Morgan notes that the industry's benchmark HFRI index was up 2.8% by end-February,  well below the 4.6% for MSCI All-Country index.

from Breakingviews:

Abenomics can clear Japan’s demographic hurdle

By Andy Mukherjee

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

Japan has a serious demographic disadvantage: its population is both shrinking and ageing. But the situation is not so dismal - at least not yet - that it will wreck Prime Minister Shinzo Abe’s plans to revive the economy.

from Global Investing:

Abenomics rally: bubble or trend?

"Abenomics" is the buzzword in Japan these days -- it refers to Prime Minister Shinzo Abe's aggressive reflationary fiscal and monetary policies that triggered the yen's 10 percent decline against the dollar and 17 percent rally in Tokyo stocks this year.

So it's no wonder that the Japanese mutual fund market, the second largest in Asia-Pacific, enjoyed the largest monthly inflows in almost six years last month, raking in as much as $11 billion.

from Photographers' Blog:

Destination Fukushima: Two years on

Photo

Fukushima, Japan

By Issei Kato

“Let’s put our hearts together and keep going, Fukushima!” reads a large banner that hangs across a large steel structure that stands next to the No. 4 reactor building at Tokyo Electric Power Co’s Fukushima nuclear power plant.

The plant was overwhelmed by a massive tsunami and earthquake two years ago, triggering hydrogen explosions and a nuclear meltdown.

from Ian Bremmer:

The top 10 grudges in the G-20

The G-20 is no happy family. Comprised of 19 countries and the European Union, once the urgency of the financial crisis waned, so too did the level of collaboration among members. Unlike the cozier G-7 -- filled with likeminded nations -- the G-20 is a better representation of the true global balance of power … and the tensions therein. So where are the deepest fault lines in the G-20? 

Below is a ranking* of the 10 worst bilateral relationships in the G20. Russia is in four of the worst, while China is in three (although Russia and China’s relationship is fine). Several countries are also in two of the worst relationships: the United States (with the two belligerents mentioned above), Japan, the UK and the EU. 

from Breakingviews:

BOJ chief could score early win by dumping rule

By Andy Mukherjee

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

Expectations are running high for Japan’s next monetary czar. Haruhiko Kuroda, who has been nominated by the government as the Bank of Japan’s next governor, needs to quickly demonstrate his deflation-fighting credentials. One way would be to do away with the BOJ’s self-imposed limit on how many government bonds it can hold.

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