The Government Pension Investment Fund should announce a reshuffling of assets in which, predicts Nomura, it would sell as much as $200B in domestic bonds to buy overseas assets. The team at Nomura sees the move as weakening the yen about about 10%.
If done at the right time, says Mitsubishi UFJ's Daisaku Ueno, dollar-yen could top ¥110 this year (¥102 at the moment).
A Bloomberg survey sees the fund cutting its local bond holding from 60% to 40%, and boosting its targets for foreign stocks to 17% and 14% (from 12% and 11%, respectively).
Also helping is Reuters reporting Japan Post Insurance - with about $846B in AUM - planning to boost its allocation in domestic stocks by as much as $3.4B this year. Also slated for a higher allocation are overseas bond holdings.
Meanwhile, Japan's trade deficit narrowed to ¥844.62B in April from ¥1.63T in March.
Export growth strengthened to 5.1% from 1.8% and topped consensus of 4.8%.
Imports slowed to +3.4% from +18.1% and exceeded forecasts of +0.8%. The high increase in March was due to a last-minute shopping spree before the sales tax increased on April 1.
Exports have disappointed over the past year or so despite the weak yen, prompting fears for Japan's economic recovery and sparking increased speculation that the BOJ might add to its massive asset-buying policy.
"We have to wait for exports to recover strongly before we will see a real drop in the trade deficit and that situation is still way out of sight," says economist Yoshiki Shinke.
The USD-JPY is -0.15% at ¥101.18, while the Nikkei is -0.2%.
Japanese machinery orders, a leading indicator of capital expenditure, have grown at the fastest rate since 1996, surging 19.1% on month in March after slumping 4.6% in February and slaying expectations for a rise of 6%.
On year, bookings +16.1% vs +10.8% and consensus of +4.2%.
While the jump in orders came before a hike in sales tax on April 1, companies expect bookings to grow 0.4% on quarter in Q2 for the fifth consecutive gain.
"The recovery in business investment remains on track," says economist Marcel Thieliant. "The rising level of capacity usage also suggests that companies will continue to invest in machinery and equipment, despite the likely plunge in aggregate demand this quarter after the consumption tax hike."
Despite the blow-out data, the Nikkei ends -0.6%, while the USD-JPY is -0.2% at ¥101.36. (PR)
Japanese GDP growth surged to its fastest level in over two years in Q1, accelerating to an annualized 5.9% from 0.3% in Q4 and breezing past consensus of 4.2%.
On quarter, GDP +1.5% vs +0.2% +1%.
The economy was boosted by personal consumption soaring an annualized 8.5% as shoppers rushed to make purchases prior to sales tax rising to 8% from 5% on April 1. Businesses lifted capex 4.9%, while they also increased output, capex, jobs and overtime pay.
The downside of the strong overall print is that the economy is expected to pull back in Q2.
The Nikkei is -0.75% as Sony weighs on sentiment following its poor earnings reports, while the USD-JPY is flat at ¥101.93. (PR)
Among the leading decliners was SoftBank (SFTBF), -5.1% as investors sold the news on the Alibaba offering. Exporters tanked as well, with a 2.9% fall in Honda and 3.4% decline in Panasonic pacing those slides.
Japan's unemployment rate held steady at 3.6% in March, as expected (PR)
Overall household spending jumped 7.2% on year after dropping 2.5% in February and blew past consensus of +1%. The likelihood is that consumers rushed to make purchases before a hike in sales tax to 8% from 5% went into effect on April 1. (PR)
The impact of the tax rise may not be as strong as feared, as auto makers and major department-stores yesterday reported smaller-than-expected declines in April sales.
The Nikkei is +0.6%, while the USD-JPY is +0.15 at ¥102.48.
Japanese retail sales jumped at the fastest level in 17 years in March, climbing an expected 11% on year after growing 3.6% in February.
On month, sales soared 16.1% vs +1.3%.
The reason for the large gain is that consumers rushed to purchase goods before a rise in sales tax to 8% from 5% went into effect on April 1. The upshot is that sales are expected to fall this month but then recover in May.
The Nikkei is -1.05%, while the USD-JPY is +0.05% at ¥102.25.
Japanese core inflation, which excludes fresh food prices, held steady at 1.3% on year in March but came in below consensus of 1.4%.
Core core CPI, which excludes fresh food and energy, slipped to +0.7% from +0.8% in February.
Overall inflation increased to 1.6% from 1.5%.
Tokyo CPI surged to +2.9% in April from +1.3% in March and core inflation to 2.7% from 1% for the biggest rise since 1992, boosted by the hike in sales tax at the start of the month. Excluding that increase, prices rose just 1%, as in March.
The question is whether the Bank of Japan's attempt to push inflation to 2% by 2015 has stalled despite the BOJ's massive bond-buying. If so, the bank might feel the need to increase its asset purchases. (PR)
BOJ officials are increasingly concerned that the domestic bond market isn't reflecting how inflation has risen over the past year or so, Bloomberg reports. That raises the risk that yields could suddenly surge. The problem for the BOJ is that yields have stayed low because of its QE program.
Meanwhile, President Barack Obama has ended a three-day trip to Japan without sealing a trade deal that's seen as key to the wider 12-nation Trans-Pacific Partnership. While the U.S. and Japan have made a breakthrough on market access, gaps remain.
The Nikkei is +0.2% and the USD-JPY is flat at ¥102.33.
Prime Minister Shinzo Abe wants the GPIF to improve returns by making higher-risk investments and reducing its reliance on low-yielding government bonds.
Citigroup believes that the Bank of Japan could increase its bond-buying to offset reduced JGB purchases by the GPIF.
The revamp is part of Abe's "third arrow" of his strategy to reform the economy and lift Japan out of deflation.
Because of its mammoth size, the GPIF is closely watched as a bellwether for Japan's institutional investors. Last June, it increased its weighting of domestic stocks and lowered that for Japanese bonds.
Buy the dip? Last night's 2.4% dive brought the Nikkei lower by about 7% for the week - it's worst 5-day stretch since the 2011 earthquake and tsunami. The index is now off about 14% YTD.
Maybe not helping is April 1's boost in the sales tax to 8% from 5%. The last previous sale tax boost in 1997 proved to be a rally-killer. "2014 is not 1997," says JPMorgan's Jesper Koll. "The probability of success is better than ever." We shall see.
Japan's Cabinet has approved an unpopular plan to reinstate nuclear energy as an important source of electricity, although there are doubts about how big a role atomic power will be able to play.
Japan may have to leave up to two-thirds of its 48 idled nuclear reactors closed, a Reuters analysis shows, due to the high cost of upgrades, local opposition or seismic risks.
The country's nuclear plants were shut following the Fukushima disaster over three years ago, which has caused the country to significantly increase its energy imports. That has acted as a drag on GDP and prompted fears that Japan could suffer from a permanent current-account surplus which could undermine confidence in its massive debt.
As expected, the Bank of Japan has left its key interest rate at 0.1% and maintained its program of expanding the monetary base by ¥60-70T ($580-680B) a year.
The BOJ refrained from further easing and maintained its optimism about the economy despite concerns about the impact of a rise in sales tax that took effect last week.
The "economy is continuing to recover moderately...albeit with some fluctuations due to the consumption tax hike," the bank said.
Japan's current account swung back to a surplus for the first time in five months in February, with the number coming in at ¥612.7B from a record deficit of ¥1.59T in January, although the surplus was lower than consensus of ¥628B. There have been fears that the deficit could become permanent, which could weaken confidence in Japan's massive debt.
The Nikkei closes -1.4%, while the USD-JPY is -0.3% at ¥102.80. (PR)
The Bank of Japan's Tankan survey of large-manufacturing sentiment increased for the fifth consecutive time, edging up to a seven-year high of 17 in Q1 from 16 in Q4 but slightly missing consensus of 18.
The non-manufacturing index rose to 24 from 20, as expected.
However, with sales tax increasing to 8% today from 5%, the manufacturing outlook print slumped to 8 from 14 and the non-manufacturing outlook dropped to 13 from 17. Both figures were worse than expected.
In addition, big companies expect to increase capital spending by just 0.1% this fiscal year, which starts today, way below a previous reading of 3.9%.
"There isn't much reason for companies to be optimistic," says economist Shinichiro Kobayashi. "The sales-tax hike is going to drag on the economy, and exports have been weaker than expected on the back of a slow global recovery." (PR)
Asian shares have traded mixed in a choppy session in which the Nikkei recovered to close up 1% after falling earlier in the day. Market players pointed to reinvestment by a public pension fund and short-covering as reasons for the reversal.
The Shanghai Composite fell 0.8% and the Hang Seng 0.2% as tech stocks took a beating following a bad debut on Wall Street for "Candy Crush" developer King Digital.
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