The number of listed Japanese companies declaring bankruptcy in the 2016 financial year fell to zero for the first time since the collapse of the bubble. The zero-bankruptcy feat, which has been achieved just six times since 1964 was last achieved in 1990.
Bankruptcies among listed companies have been consistently low since the Abenomics economic revival campaign got going in 2013 – the year the Bank of Japan began its qualitative and quantitative easing programme. In February last year, the central bank introduced its negative interest rate policy, underscoring the historically low debt servicing burden on Japanese companies.
Just two bankruptcies of listed companies were logged in fiscal 2015, according to Teikoku Databank. The all-time peak of 45 was reached in 2008 at the height of the global financial crisis.
According to Tokyo Shoko Research overall bankruptcies also fell in Japan in calendar 2016 – both in terms of the number of companies (a 4.6 per cent drop to 8446) and in terms of total value (a 5.0 per cent drop to Y2trn).
But analysts point out that those figures do not tell the full story as they track only companies that have undergone court-led liquidation.
Tokyo Shoko Research survey in August last year showed that in a year where around 8,500 companies went through court led bankruptcy, a total of about 27,000 either suspended or dissolved their businesses.
The euro climbed to its strongest level against the dollar since mid-February as the markets reassessed the odds of a December rate rise by the European Central Bank.
A day after mildly hawkish comments from European Central Bank president Mario Draghi helped send the single currency higher, the euro tacked on another 0.9 per cent to hit a three week high of $1.0673 following a report that the ECB had discussed whether rates could rise before it ends its bond buying programme.
However, two people familiar with the discussions denied there had been any meaningful debate over the issue. One person said some members are keen for the council to consider raising the deposit rate, now at minus 0.4 per cent, before it ends its quantitative easing programme.
The ECB plans to keep on buying bonds until the end of this year, and is considered likely to extend the programme into 2018 — though at a slower pace than the current level of €60bn a month.
Against the pound, the euro was up 1 per cent at €1.1393 – a level last seen in mid-January. The currency also firmed more than 1 per cent against the Japanese yen at 122.83.
The Bank of Japan is poised to upgrade its three-year economic growth outlook in the final days of January in light of strong recent indicators, though stronger inflation forecasts will be a harder sell.
The central bank will compile its quarterly outlook on economic activity and prices at a two-day policy meeting beginning Monday. The report will outline the BOJ’s forecast for each of the three years through fiscal 2018,
The last report, released in November, pegged gross-domestic product growth at 1% for fiscal 2016, 1.3% for fiscal 2017 and a slim 0.9% for fiscal 2018. Discussions this time are expected to center on the first two years, with the fiscal 2017 growth forecast thought to be headed for the mid-1% range.
Signs for an upgrade are strong. The BOJ in December boosted its outlook for Japan’s economy as a whole for the first time in 19 months. Such goods as smartphone parts and automobiles are driving up exports and industrial production, while consumer spending on durable goods such as cars is on the rebound as well. Changes made late last year to the GDP calculation method will also give the figure a boost: companies’ research and development spending, which has shown consistent growth over the years, now counts as investment.
BOJ Gov. Haruhiko Kuroda said at a World Economic Forum panel discussion Jan. 20 that he expects Japan’s economy to grow by around 1.5% in fiscal 2016 and fiscal 2017, significantly exceeding the country’s potential growth rate.
With the world facing uncertainty over the new administration in Washington, the Japanese central bank is among the many keeping their eyes peeled.
The yen’s depreciation against the dollar since Donald Trump won the U.S. presidential election in November has given the Bank of Japan some much-needed breathing room, as a weaker home currency will likely buoy the economy and consumer prices here.
BOJ Gov. Haruhiko Kuroda welcomed the prospect of the yen softening on the back of a robust American economy, saying Trump’s planned tax cuts and infrastructure spending would lift the economies of the U.S. and the world.
The BOJ could watch from the sidelines without having to roll out more monetary easing — a particularly helpful development for a central bank nearly out of easing options.
“The specifics of economic policy under the Trump administration have not become clear,” according to BOJ Deputy Gov. Hiroshi Nakaso. But the bank apparently expects lower taxes and other anticipated economic measures to boost the economy.
The Bank of Japan may deliver a sunnier view of the country’s economy when its policy board meets next week, optimistic over steadying foreign economies boosting exports and production, as well as recovering consumption at home.
The central bank sees improvements in exports and production of automobiles and smartphone parts. It would mark the first upgrade in 19 months.
Since its March report, the BOJ has asserted that “Japan’s economy has continued its moderate recovery trend, although exports and production have been sluggish due mainly to the effects of the slowdown in emerging economies.” This time, it may alter or strike the “exports and production have been sluggish” language. Some at the bank have suggested removing the “trend” in “moderate recovery trend” to emphasize that the economy’s recovery is ongoing.
In addition to the bullish American economy, the deceleration in emerging economies has slowed since the summer. As the BOJ sees it, combined with the effect of the Trump rally in the stock market, the real economy is headed toward recovery. Exports to China such as smartphone components continue to grow, while at home, consumers are opening their wallets for fall-winter clothes.
“Income is increasingly going toward consumption,” said a BOJ official.
The Bank of Japan last week offered to buy bonds at a fixed yield to curb rising interest rates, playing what was seen as an ultimate trump card far earlier than many expected.
The BOJ announced its first-ever fixed-rate purchase operation on the morning of Nov. 17 to counter mounting fears of an upswing in interest rates. Yields on 10-year Japanese government bonds had climbed steadily since the U.S. presidential election, rising as high as 0.035% the day ahead of the move. The fixed-rated option was introduced only two months ago as part of a monetary policy overhaul in late September that set a target of around zero for long-term yields.
A call went out for two- and five-year JGBs to address the rapid surge in short- and medium-term bond yields, according to the BOJ’s Financial Markets Department. There were no takers: The offered yields were higher than going market rates, meaning the offered prices were lower, sending wise traders elsewhere. But the conditions of the operation sent a strong signal as to how high the central bank will let rates go before stepping in. Yields slid across all maturities after the move was announced.
Since then, “interest rates’ upward climb has been weakened somewhat,” Takako Masai, a member of the bank’s policy board, told reporters after a speech Monday. “I get the sense that the purpose of fixed-rate operations has been well conveyed to markets.”
At first, the idea of central banks intervening in the equity markets was probably seen even by its fans as a temporary measure. But that’s not how government power grabs work. Control once acquired is hard for politicians and their bureaucrats to give up. Which means recent events are completely predictable:
(Bloomberg) – The value of the Swiss National Bank’s portfolio of U.S. equities rose nearly 1 percent to a record in the three months through September on the back of rallying share prices.
The holdings increased to $62.4 billion from $61.8 billion at the end of June, according to calculations by Bloomberg based on the central bank’s regulatory filing to the U.S. Securities and Exchange Commission and published on Monday.
The central bank had stakes in some 2,500 companies listed in the U.S., according to the SEC filing. Its biggest holdings were Apple Inc., Microsoft Corp. and Exxon Mobil Corp., according to data compiled by Bloomberg.———————-
(Bloomberg) – The Bank of Japan’s controversial march to the top of shareholder rankings in the world’s third-largest equity market is picking up pace.
Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings. BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month, adding to an unprecedented campaign to revitalize Japan’s stagnant economy.
While the BOJ doesn’t acquire individual shares directly, it’s the ultimate buyer of stakes purchased through ETFs. Estimates of the central bank’s underlying holdings can be gleaned from the BOJ’s public records, regulatory filings by companies and ETF managers, and statistics from the Investment Trusts Association of Japan. Forecasts of the BOJ’s future shareholder rankings assume that other major investors keep their positions stable and that policy makers maintain the historical composition of their purchases.
The central bank’s influence on Japanese stocks already rivals that of the biggest traders, often called “whales” in the industry jargon. It’s the No. 1 shareholder in piano maker Yamaha Corp., Bloomberg estimates show, after its ownership stake via ETFs climbed to about 5.9 percent.
The BOJ is set to become the top holder of about five other Nikkei 225 companies by year-end, after boosting its annual ETF buying target to 6 trillion yen last month. By 2017, the central bank will rank No. 1 in about a quarter of the index’s members, including Olympus Corp., the world’s biggest maker of endoscopes; Fanuc Corp., the largest producer of industrial robots; and Advantest Corp., one of the top manufacturers of semiconductor-testing devices.
The central bank owned about 60 percent of Japan’s domestic ETFs at the end of June, according to Investment Trusts Association figures, BOJ disclosures and data compiled by Bloomberg. Based on a report released on Friday by the Investment Trusts Association, that figure rose to about 62 percent in July.
(Reuters) – The Federal Reserve might be able to help the U.S. economy in a future downturn if it could buy stocks and corporate bonds, Fed Chair Janet Yellen said on Thursday.
Speaking via video conference with bankers in Kansas City, Yellen said the issue was not a pressing one right now and pointed out the U.S. central bank is currently barred by law from buying corporate assets.
But the Fed’s current toolkit might be insufficient in a downturn if it were to “reach the limits in terms of purchasing safe assets like longer-term government bonds.”
“It could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions,” she said.If your first reaction to the above (especially Yellen’s clear misunderstanding of the respective roles of central banks and stock markets) is “these guys are idiots,” you’re probably in the minority. Most modern citizens see government intervention of any kind as at least a potentially good thing, depending on the situation. They’re wrong in this case, for the following reasons:
The biggest problem for the financial markets is not stocks nor is it the economy.
It’s the Bond Bubble.
Globally the bond bubble is now over $199 trillion in size. The world taken as a whole is sporting a Debt to GDP ratio of over 250%.
This is a systemic issue.
Once the bond bubble became large enough, Governments themselves are at risk of beingCentral insolvent. At that point, there were only three options:
1) Stop spending as much money.
2) Increase revenues (more on this shortly).
3) Make the debt loads easier to service.
Governments/ politicians will never push #1 because it is political suicide (the minute someone pushes for a budget cut the media and his/ her political opponents begin attacking the candidate for being “heartless” about some issue or other).
Option #2 is the so-called “growth” option. When Central Banks talk about focusing on “growth” what they’re really hoping to do is increase taxes (higher incomes, higher GDP growth=more tax money).
Remember, taxes=revenues for Governments. And revenues are what the Government uses to make debt payments. However, at some point, once you are deep enough in debt, the growth option becomes impossible.