Japan’s takeover rules are destined to be shaken up — but probably not for some time.
After falling off a cliff at the start of this year as the global financial crisis gripped, mergers and acquisitions by Japanese companies overseas are likely to pick up again in the second half of this year, according to boutique Japanese M&A advisory firm Recof Corp.
If the Nikkei’s spring rally from multi-decade lows whet appetites for a “Japan is back” soaring benchmark, it’s time to check that excessive exuberance, says Deutsche Securities’ Naoki Kamiyama, who sees a top of 10,500 yen for the Nikkei 225 and 1,000 for the Topix over the next year.
Mongolia may seem like an extremely exotic investment destination in a world where money is heading for safety and avoiding risk, especially when violent riots are seizing the capital, Ulan Bator. But not for Junichiro Sano, president and CEO of Dalton Investments KK. “I found really special investment opportunities,” Sano said at the Reuters Japan Investment Summit. Sano said he’s been travelling to Mongolia regularly to learn more. The Mongolian Stock Exchange is made up of 360 companies and a total market capitalisation of $750 million, Sano said. As for corporate governance in Mongolia, a topic of much debate at the summit, Sano simply said: “It is nothing.” Seventeen stock brokers are in the country, but there is no official qualification. Riots have hit Ulan Bator this week, leading to five deaths, over accusations of fraud in a parliamentary election held last weekend.
Japanese companies are on the prowl for foreign assets, and this time it has nothing to do with Rockefeller Center and world-famous golf courses as Japan was famed for snapping up in the late 1980s at inflated prices. Steven Thomas, managing director and head of Japan mergers and acquisitions at UBS, said at the Reuters Japan Investment Summit that Japan Inc. sees foreign acquisitions as necessary to open up growth opportunities.
No country has been a bigger fan of the dollar over the years as Japan. You can see it in the country’s $1 trillion of foreign exchange reserves almost entirely concentrated in U.S. bonds or the sheer portfolio flows in the greenback month after month. But that may be changing. Yuuki Sakurai, head of financial planning and investment at Japan’s No. 9 life insurer Fukoku Mutual Life, said the dollar’s long role as the centre of the global currency universe may be coming to an end, partly due to politics. “Look at the U.S. position in the world community, that’s changing and that’s part of the story. I think Pax Americana, that regime is gone. But it’s not happening overnight, it’s changing gradually,” said Sakurai, whose oversees about $54 billion of assets, while speaking at the Reuters Japan Investment Summit. “If you think that a paradigm based on the dollar may be starting to change and that the euro’s weight globally may come close to matching the dollar’s presence, the dollar might fall to 80 yen in the future,” Sakurai said. “I am saying something a bit extreme, but the dollar might fall below 50 yen 10 years from now,” he said. The dollar is near 106.50 yen now, up from a 13-year low of 95.77 yen in March, but it is still not far from record lows against the euro.