Lance

Outlook for Japanese Stocks: A Rising Sun

I should get excited about Japanese shares in general because DoCoMo is buying a majority stake in a business that they seem to have absolutely little or no experience in? A business seemingly well outside the boundaries of its traditional business? A business that seems to have done well last year marketing a workout DVD?

While it does suggest the DoCoMo had some chump change (~300 million dollars) burning a hole it its pocket, it also suggests that DoCoMo believes that its own business is not where it should be investing money right now. Generally, to me, this is not a "The Sun Is Rising" kind of signal.

I think you need to pay more attention to employment in Japan. Right now, pretty much no one feels secure about his or her job. Until that changes, the economy is not going to show much life.

And Seven & I Holdings is not really what I would call an exporter, either.

Japan's Nikkei: Black Hole or Buying Opportunity?

I cannot imagine what it will take to spur domestic consumption here in Japan. Not only is job stability quite precarious right now, but people who still have their jobs know that with even the hint of a recovery, the consumption tax is going to probably double. Pent-up demand and a desire to beat such a hike might trigger a temporary rally in consumption, but I have a hard time imagining that any rally would be durable.

So unable and/or unwilling to fix itself, Japan will wait for the rest of the world to heal and hope for the best. It might be a long wait.

One possible ray of hope for Japanese exporters: The government could simply decide to put the consumption tax hike off for longer than prudent (seemingly plausible excuses for that would be easy to manufacture), and thus trigger a yen slide. "No, we haven't intervened in the currency markets." "Well, not directly, anyway."

Should Japan Investors Welcome the Return of Inflation?

CLH: Inflation is certainly apparent in Japan -- I live here, and I can tell you that for the first time in a decade and a half prices are rising.

And yes, as the article implies, it's cost-push inflation, not the best kind.

But as is typical with many phenomena in equity markets, the inflation is likely to be harmful in some cases, potentially helpful in others. Manufacturers will have to weigh resistance to price hikes. There very well might be enough resistance to hurt. But if the inflation is bothersome enough to manufacturers, the BoJ may have to respond, and that could make Japanese banks look even cheaper than they already do as spreads might widen.

Disclosure: Long Japanese banks since winter and loving it.

Nikkei Weekly Outlook: Eye on I-banks, Inflation and the Yen

Hello Steven,

We've also got 63.3 percent of the issues in the TSE 1st section trading above their 10-week MAs. That number reached a rather eye-catching 84.4 percent in mid May, and it's been stubbornly high since then, even with the recent pullback. Either the market is embarking on a serious trend higher, which I would tend to doubt, or that number needs to come down below 50 percent, perhaps to 40 or just below, where I would expect safer buying.

I continue to like Sumitomo Trust, and full disclosure: I have a position. At below 850 (closed up 29 at 852 today), it yields more than 2 percent, and the dividend is solid. Actually, some of the banks here are still trading at undeserved discounts, IMHO. Indeed, Wall Street will either erase some of those discounts or pad them this week. But I continue to buy on bouts of weakness. The systemic risk seems to be over there (stateside), not over here.

A Few Reasons to Buy Yen

Maybe.

But you should know that the Japanese *always* repatriate cash leading up to year-end book closings (March 31). So that means very little at present.

Moreover, the BoJ is unlikely to raise interest rates anytime soon. A bit of inflation is actually *welcome* here -- somewhat of a relief -- after prolonged deflation. Politically, with a weakening job market and stagnant salaries, raising rates here right now is a non-starter. And remember, the BoJ Governor is a third-pick political compromise, hardly anyone to show a streak of independence when it comes to monetary policy. Also, "round two" inflation (higher salaries demanded by unions to keep pace with higher prices) is much less likely here now than in the Euro zone or America. A rate hike here before the Fed? I'll give you at least 3-2 odds that does not happen.

My bet is that the yen-dollar cross goes almost nowhere for the next year or longer. Maybe 4 or 5 percent up and down but not getting any real directional traction either way. The people who were calling for 80 six weeks ago have lost their bet, which was really a bet on a complete American economic collapse. Didn't happen, and looks less likely day by day.