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E.g., 25-04-2017
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    Gavekal Research

    The BoJ’s Tantrumless Taper

    When the Bank of Japan’s board meets on Wednesday and Thursday this week, at least one member will be calling for a retreat from the central bank’s policy of negative interest rates coupled with quantitative easing “with yield curve control”. In a speech last month Takahide Kiuchi called on the BoJ to taper its purchases of Japanese government bonds from ¥80trn annually to ¥45trn. The chance that the central bank will announce any such change in...

    0
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    Gavekal Research

    A Win-Win Deal For Abe And Trump?

    This Friday Japanese prime minister Shinzo Abe will touch down in Washington for his second meeting with Donald Trump since the November 8 US election. The auspices hardly appear propitious. In the run-up to the meeting, the new US president has pulled out of the Trans-Pacific Partnership, a multilateral trade deal built largely around the US-Japan economic axis. He has railed against Japan for deliberately undervaluing the yen. He has bemoaned...

    3
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    Gavekal Research

    Japanese Equities: More Where That Came From

    Japan is the top performer among developed world equity markets over the last six months, with the Nikkei 225 up 28% in local currency terms. Even in US dollar terms, the Japanese market has gained a robust 14%, enough to outperform an S&P 500 lent wings by the Trump trade. That strength is set to continue into 2017, with the Tokyo market remaining well bid on the back of a monetary policy stance that the Bank of Japan will find it hard—even...

    2
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    Gavekal Research

    The Japan Reflation Trade

    About a month ago, Japanese investors learnt that a man who wants to rip up their prime minister’s prized free trade deal and potentially jettison Japan’s key security guarantees would soon be US president. After an initial wobble, they spent most of the last four weeks buying equities with such gusto that the Nikkei 225 is up almost 14%.

    0
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    Gavekal Research

    A New Tech Cycle?

    Weak Japanese exports for October were not a big surprise given that the yen has been strong and global trade remains lackluster. Yet buried within recent (dreary) trade releases is evidence pointing to a new semiconductor investment cycle. The first signal, from official data at least, came in Japan’s 3Q16 GDP report which showed growth at 0.5%, versus an expected 0.2%, with the difference explained by exports of electronic components and...

    0
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    Gavekal Research

    Neil Newman: Japanese Equities — Good For A Rally?

    The Bank of Japan has rolled back the date that it expects to hit its 2% inflation target, the economy is soft and foreign investors have thoroughly given up on Japanese equities. So why does Neil think there is a good chance of a decent “Santa rally” going into the year end. In this video interview he explains.

    0
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    Gavekal Research

    The New Frontier In Aerospace

    The highlight of this week’s Zhuhai airshow in Southern China was a fly-past by two of the People’s Liberation Army’s new J-20 warplanes, touted as China’s first stealth aircraft. Western military analysts reserved their judgment, pointing out they had learned nothing new about the aircraft, except that it was very noisy. Nevertheless, the broader message from Zhuhai was clear, echoing a similar message broadcast by the Japan International...

    0
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    Gavekal Research

    The Gavekal Monthly: Deflation Ends; What Next?

    The biggest market move of the past month was a significant rise in bond yields across the US and Europe. Much commentary has suggested that this might be a symptom of a sustained rise in inflationary pressures, as wages and rents start to push up prices in the US, and Chinese producer prices end four long years spent in negative territory. We are skeptical. The recent rise in yields has so far reversed only half of the decline in the first half...

    0
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    Gavekal Research

    Japan Does An Apple

    The Bank of Japan and the Japanese government have done their best to stop a grinding appreciation of the yen, but to no great avail. The unit is up 14% this year against the US dollar, which has seemingly delivered a body blow for the monetary easing “arrow” in Prime Minister Shinzo Abe’s 2012 revival quiver. This is certainly the view of foreign investors who this year have pulled money out of Japan at the fastest rate since 1987. And yet a...

    1
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    Gavekal Research

    Even Better Than The Real Thing

    This summer’s craze for Pokémon Go underlined how augmented and virtual reality—long more virtual than real—are fast becoming a viable proposition. In this paper, Neil reviews the latest advances in the technology, and assesses the most promising fields for near term growth.

    2
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    Gavekal Research

    Neil Newman: BoJ Policy Meeting In A Nutshell

    After the Bank of Japan’s announcement earlier today of quantitative easing “with yield curve control”, Neil delivers a quick-fire video assessment of the new policy slant, and what it will mean for markets and the broader Japanese economy.

    0
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    Gavekal Research

    Don’t Misread The BoJ’s Signals

    The monetary policy committees of both the Federal Reserve and the Bank of Japan meet tomorrow. But whereas the Fed faces a simple binary call—either raise rates or don’t—the decision confronting the Bank of Japan is more complex.

    0
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    Gavekal Research

    The Death Throes Of The JGB Market

    While the Japanese government was rolling out its latest stimulus package yesterday—with a headline value of ¥28trn, but only ¥4.6trn of additional fiscal spending this year—investor attention was fixated on the spasms in the JGB market. Having touched a record low of -0.3% last Wednesday, the yield on 10-year JGBs leapt 28bp in just five trading days to hit a four and a half month high of -0.02% yesterday morning. On one level the spike in...

    4
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    Gavekal Research

    The Gavekal Monthly: Shall We Dance?

    In a world in which the Fed shows no inclination to get ahead of the curve on inflation and in which both the ECB and the BoJ are in full quantitative easing mode, investors everywhere are on the hunt for yield. But the chase is a nervous one. Investors are all too aware that equities and bonds are sending conflicting signals, and that the favorable trends that have lifted most assets over the last six months could be disrupted by a sudden spike...

    0
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    Gavekal Research

    The JGB Endgame Approaches

    Over the last couple of weeks, the world’s attention has been focused by turns on British politics, Italy’s banking crisis, the US presidential race and most recently, last night’s ghastly events in Nice. It is little surprise then, that a series of three stories from Japan (or perhaps just two and a half) has passed largely under the radar. Taken together, however, these developments bear heavily on the future of the Japanese government bond...

    2
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    Gavekal Research

    The Gavekal Monthly: Life After The Brexit Vote

    The world is now a considerably more uncertain place than a month ago. Following the UK’s referendum vote in favor of Brexit, a near-term recession in the UK is more likely than not, the European Union faces the possibility of a renewed economic slowdown, and investors find themselves forced to reassess the probability that Donald Trump will win November’s US presidential election. In this edition of the Gavekal Monthly, our analysts set out to...

    0
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    Gavekal Research

    Japan As Safe Haven

    Global markets are in a risk-off mood as investors scramble to find a sure thing in an uncertain world. The populist surge in Europe and the US is ending long held “certainties” about the developed democracies, while next week’s Brexit vote could set in train the European Union’s break-up. Ironically, as investors scramble for stable ground, Japan is proving an island of calm, at least for those with an eye to capital preservation. The yen has...

    0
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    Gavekal Research

    The New Material

    The US$1.8trn global aviation sector shows no sign of slowing—last year passenger numbers rose by 6.5%. The race is on to deliver cheaper, more efficient aircraft. The big winners from this trend may be makers of composite carbon fiber. The market for carbon fiber used in aircraft is set to grow from US$17.3bn in 2014 to US$34.2bn by 2020.

    1
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    Gavekal Research

    Japan: Twice Bitten, Thrice Shy

    It was a case of twice bitten, thrice shy. This week Shinzo Abe announced he will postpone next April’s planned 2pp increase in Japan’s sales tax until October 2019—a step the prime minister had previously sworn he would only take in a Lehman-scale crisis. Despite Abe’s protestations to the contrary at last weekend’s G-7 meeting, the world economy is facing no such meltdown. Nevertheless, deferring the tax hike makes sense. Previous increases in...

    0
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    Gavekal Research

    A New Marginal Buyer Of Japanese Equities

    Thanks in part to erratic monetary policy moves, Japan has slid back to being an irrelevance for global investors. Perhaps that does not matter, as foreigners only account for about 30% of the market while Japan has a vibrant domestic equity scene. Yet, the fact remains that it generally takes fickle gaijin to get excited about Japanese equities for the market to break out—that was the story in 2012-15 as a 50% yen devaluation supercharged...

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