Darrel Whitten's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/55488/comments http://seekingalpha.com/article/157554/comments?source=feed#comment-642489 642489
All (and more) than you ever wanted to know about Japanese politics is at the Observing Japan blog by Tobias Harris (observingjapan.com). Glocom (International University) www.glocom.ac.jp/e/ has academic discussions about Japanese policy. ]]> Sun, 23 Aug 2009 19:48:58 -0400
All (and more) than you ever wanted to know about Japanese politics is at the Observing Japan blog by Tobias Harris (observingjapan.com). Glocom (International University) www.glocom.ac.jp/e/ has academic discussions about Japanese policy. ]]> http://seekingalpha.com/article/157554/comments?source=feed#comment-640726 640726
Since the LDP was formed in November 1955 and Ichiro Hatoyama (Democratic Party of Japan leader Yukio Hatoyama’s father) formed the first LDP-led administration, the LDP lost its control (majority) in the House of Councillors in 1989, 1998 and 2007 because of voter dissatisfaction, but they have maintained control in the House of Representatives for all but some 40 weeks between August 1993 and June 1994. As you are probably aware, the lower house is where the real power lies in Japan’s government, as the lower house is able to override vetoes on bills imposed by the House of Councillors with a two-thirds majority, and in the case of treaties, the budget, and the selection of the prime minister, the House of Councillors can only delay passage, not block the legislation.

The LDP lost control of the lower house in 1993 not because they were voted out but because a number of its members broke from the Party to form the Renewal Party and the New Party Sakigake. Voters actually gave the LDP more seats in the 1993 election, it was not enough to offset the losses from the defections. Ex-LDP member Morihiro Hosokawa of the Japan New Party was installed as Prime Minister and head of a coalition of seven parties (Renewal Party, Japan New Party, the New Party Sakigake, the Social Democratic Party and the Komeito). But the coalition government soon fizzled and the Hosokawa coalition government cabinet was a disaster. More ironic was the fact that Prime Minister Hosokawa stated that he would “continue the policies of the Liberal Democratic Party”.

The only lesson that the Hosokawa, Hata and Murayama Administrations demonstrated to Japanese voters was that Japan’s opposition parties were incapable of running the country. The LDP soon regained its pivotal position in government eleven months later when it joined with the Social Democratic Party and the New Party Sakigake in late June of 1994 to establish a coalition government under Prime Minister Murayama. In the midst of 1993~1994 confusion, the LDP did temporarily lose many of its leadership posts in the Lower House. One of these, the Speaker of the House, was assumed for the first time in Japanese history by a woman, Takako Doi of the Social Democratic Party.

Through various “coalitions” since the 1990s, LDP leaders have shown themselves to be adroit at cooperating with other parties while simultaneously sucking the life out of them. The Socialists, for example were the major opposition party for most of the postwar period but were virtually destroyed after trading principle for power by joining with the LDP in the 1990s. They now of course are in a ruling coalition with the Komeito.

The Liberal Democratic Party's fall from power in 1993 was due in part to its failure to carry out fundamental political reforms. As an opposition party in the post-Miyazawa Cabinet era, finding ways to get this stalled process moving again became one of the LDP's top priorities, and this gained voter support. Voters turned back to the LDP after seeing the political turmoil and inability to implement policy in the coalition government. ]]> Fri, 21 Aug 2009 23:54:27 -0400
Since the LDP was formed in November 1955 and Ichiro Hatoyama (Democratic Party of Japan leader Yukio Hatoyama’s father) formed the first LDP-led administration, the LDP lost its control (majority) in the House of Councillors in 1989, 1998 and 2007 because of voter dissatisfaction, but they have maintained control in the House of Representatives for all but some 40 weeks between August 1993 and June 1994. As you are probably aware, the lower house is where the real power lies in Japan’s government, as the lower house is able to override vetoes on bills imposed by the House of Councillors with a two-thirds majority, and in the case of treaties, the budget, and the selection of the prime minister, the House of Councillors can only delay passage, not block the legislation.

The LDP lost control of the lower house in 1993 not because they were voted out but because a number of its members broke from the Party to form the Renewal Party and the New Party Sakigake. Voters actually gave the LDP more seats in the 1993 election, it was not enough to offset the losses from the defections. Ex-LDP member Morihiro Hosokawa of the Japan New Party was installed as Prime Minister and head of a coalition of seven parties (Renewal Party, Japan New Party, the New Party Sakigake, the Social Democratic Party and the Komeito). But the coalition government soon fizzled and the Hosokawa coalition government cabinet was a disaster. More ironic was the fact that Prime Minister Hosokawa stated that he would “continue the policies of the Liberal Democratic Party”.

The only lesson that the Hosokawa, Hata and Murayama Administrations demonstrated to Japanese voters was that Japan’s opposition parties were incapable of running the country. The LDP soon regained its pivotal position in government eleven months later when it joined with the Social Democratic Party and the New Party Sakigake in late June of 1994 to establish a coalition government under Prime Minister Murayama. In the midst of 1993~1994 confusion, the LDP did temporarily lose many of its leadership posts in the Lower House. One of these, the Speaker of the House, was assumed for the first time in Japanese history by a woman, Takako Doi of the Social Democratic Party.

Through various “coalitions” since the 1990s, LDP leaders have shown themselves to be adroit at cooperating with other parties while simultaneously sucking the life out of them. The Socialists, for example were the major opposition party for most of the postwar period but were virtually destroyed after trading principle for power by joining with the LDP in the 1990s. They now of course are in a ruling coalition with the Komeito.

The Liberal Democratic Party's fall from power in 1993 was due in part to its failure to carry out fundamental political reforms. As an opposition party in the post-Miyazawa Cabinet era, finding ways to get this stalled process moving again became one of the LDP's top priorities, and this gained voter support. Voters turned back to the LDP after seeing the political turmoil and inability to implement policy in the coalition government. ]]> http://seekingalpha.com/article/150111/comments?source=feed#comment-597439 597439 It is also the largest importer of Japanese goods.

Moreover, China was responsible for 38% of Japan's economic growth in 2002, but this surged to 68% in 2006.

While a good deal of China's output is exported to the the US and Europe, Japan has become a major export market as well. Thus while it can be argued that a good deal of Japan's exports to China are simply re-exported to the US and Europe, let's put the myth to bed that the US is still Japan's largest trading partner. ]]> Tue, 21 Jul 2009 22:41:03 -0400 It is also the largest importer of Japanese goods.

Moreover, China was responsible for 38% of Japan's economic growth in 2002, but this surged to 68% in 2006.

While a good deal of China's output is exported to the the US and Europe, Japan has become a major export market as well. Thus while it can be argued that a good deal of Japan's exports to China are simply re-exported to the US and Europe, let's put the myth to bed that the US is still Japan's largest trading partner. ]]> http://seekingalpha.com/article/131951/comments?source=feed#comment-472056 472056
Just to set the record straight, savings rates in Japan are no longer higher than the US. US savings rate (as of Q4 2008) was over 3%, while Japan's has fallen to just above 2%, as the population rapidly ages and the number of "working poor" rapidly rises. Japanese salaries have fallen in seven of the past 10 years, unlike the OECD as a whole (25 countries), where average annual pay has risen consistently for nearly two decades, even during recessions.

As a result of the 90s Heisei Malaise, the Japanese government got all the debt, while corporations absorbed all the profit.

]]> Tue, 21 Apr 2009 23:44:28 -0400
Just to set the record straight, savings rates in Japan are no longer higher than the US. US savings rate (as of Q4 2008) was over 3%, while Japan's has fallen to just above 2%, as the population rapidly ages and the number of "working poor" rapidly rises. Japanese salaries have fallen in seven of the past 10 years, unlike the OECD as a whole (25 countries), where average annual pay has risen consistently for nearly two decades, even during recessions.

As a result of the 90s Heisei Malaise, the Japanese government got all the debt, while corporations absorbed all the profit.

]]> http://seekingalpha.com/article/102297/comments?source=feed#comment-294021 294021
-Total Debt (@JPY100/USD) : $122 billion

(S-T Debt)
S-T Debt: $35 billion
L-T Debt due in one year: $24 billion

- As of the end of March 2008, the company had an unused credit line of some $26 billion. Remember that Toyota can borrow in Japan at much lower rates.

- S-T debt includes commercial paper of $23 billion at an average interest rate of 3.76%

- Other short-term debt of $12 billion-plus at average interest rate of 3.36%.

- $54.5 billion of medium-term notes are due in stages between 2008~2027. 2008 portion included in "long-term debt due within 1 year".

(Bloomberg) **Yields on three-month corporate debt with the highest credit rating rose to a 12-month high of 0.83 percent on Sept. 25, the week after Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in U.S. history.
Japanese banks are rushing to the blue-chip names, so the companies benefit from tighter spreads on loans.

Doesn't look like Japanese banks are running away from refincing by large, blue chip Japanese companies. ]]> Thu, 30 Oct 2008 02:14:08 -0400
-Total Debt (@JPY100/USD) : $122 billion

(S-T Debt)
S-T Debt: $35 billion
L-T Debt due in one year: $24 billion

- As of the end of March 2008, the company had an unused credit line of some $26 billion. Remember that Toyota can borrow in Japan at much lower rates.

- S-T debt includes commercial paper of $23 billion at an average interest rate of 3.76%

- Other short-term debt of $12 billion-plus at average interest rate of 3.36%.

- $54.5 billion of medium-term notes are due in stages between 2008~2027. 2008 portion included in "long-term debt due within 1 year".

(Bloomberg) **Yields on three-month corporate debt with the highest credit rating rose to a 12-month high of 0.83 percent on Sept. 25, the week after Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in U.S. history.
Japanese banks are rushing to the blue-chip names, so the companies benefit from tighter spreads on loans.

Doesn't look like Japanese banks are running away from refincing by large, blue chip Japanese companies. ]]> http://seekingalpha.com/article/85929/comments?source=feed#comment-211268 211268
1) While Inpex forecasts assume a Brent benchmark oil price, the actual benchmark for Japan is Dubai crude. Relative Brent, Dubai crude averaged $118.90/bbl, for a discount to Brent crude of over $4/bbl.

2) In FY08, of the JPY233 bln increase in sales for Inpex, unit prices accounted for JPY216.6 bln, volume increases JPY48.6 bln and exchange rates (stronger yen) minus JPY31.0 bln. Every $1/bbl annual appreciation in Brent crude oil gives a JPY2.2 bln boost to the company's net income, while every JPY1 appreciation slices JPY2.2 bln off of earnings, i.e., a JPY1 appreciation and a $1/bbl Brent crude appreciation would be a wash.

3) Nominal earnings are also significantly affected by inventory gains/losses. Inpex uses lower of cost or market average, with cost being calculated by the moving average method.

Japanese oil firms are notoriously conservative about oil price projections, believing that low balling earnings and beating street expectations is better than high balling earnings, missing street expectations, and then getting beaten up by investors. Unlike European and US oil execs, the top guys do not get megabucks in total comp. In Inpex's case, 13 inside directors (management) got an average of JPY46 million/director, of $460,000 per director (including bonuses). Compare this, for example, to Donald Humpreys, CFO of Exxon Mobile, with 2007 comp and bonus of $2.689 mln and total stock option and other calculated comp of $9.1 million ]]> Tue, 22 Jul 2008 03:26:08 -0400
1) While Inpex forecasts assume a Brent benchmark oil price, the actual benchmark for Japan is Dubai crude. Relative Brent, Dubai crude averaged $118.90/bbl, for a discount to Brent crude of over $4/bbl.

2) In FY08, of the JPY233 bln increase in sales for Inpex, unit prices accounted for JPY216.6 bln, volume increases JPY48.6 bln and exchange rates (stronger yen) minus JPY31.0 bln. Every $1/bbl annual appreciation in Brent crude oil gives a JPY2.2 bln boost to the company's net income, while every JPY1 appreciation slices JPY2.2 bln off of earnings, i.e., a JPY1 appreciation and a $1/bbl Brent crude appreciation would be a wash.

3) Nominal earnings are also significantly affected by inventory gains/losses. Inpex uses lower of cost or market average, with cost being calculated by the moving average method.

Japanese oil firms are notoriously conservative about oil price projections, believing that low balling earnings and beating street expectations is better than high balling earnings, missing street expectations, and then getting beaten up by investors. Unlike European and US oil execs, the top guys do not get megabucks in total comp. In Inpex's case, 13 inside directors (management) got an average of JPY46 million/director, of $460,000 per director (including bonuses). Compare this, for example, to Donald Humpreys, CFO of Exxon Mobile, with 2007 comp and bonus of $2.689 mln and total stock option and other calculated comp of $9.1 million ]]> http://seekingalpha.com/article/74439/comments?source=feed#comment-161029 161029
The Japan Corporate Governance Research Institute (JCGR.org) releases annual JCG indices for individual Japanese companies that is available for free. Others like Governance Metrics International, Northern Trust and State Street sell their governance indices to institutions and even to the companies they rate.

Ironically, JCGR has found that Japanese firms with highly rated JCG are more likely to undergo corporate governance reforms after experiencing poor financial performance. However, they admit that the relationship between the JCG Index and performance may actually be negative--thereby indicating the tricky nature of using governance metrics to measure medium-term stock performance.

More ironically, the pitfalls of "cookie cutter" governance rankings are highlighted by the fact that Nomura Holdings topped the JCG Indices in 2006, only to be brought down by an insider trading and other scandals that will hurt their investment banking business. In addition, the JCG indices cover 312 of some 3,800 listed Japanese companies.

Thus a corporate governance "score" is only one, and a tricky one at that, to measure the quality of management and corporate governance--and an even trickier way of measuring potential stock price performance. A better measurement might be foreign ownership (and the corporate governance pressures that implies) and the lack of stable domestic shareholders, such as a parent company or Japanese banks/insurance companies.

At any rate, good corporate governance is only one (increasingly important) factor to consider when picking stocks, and I have my doubts about the effectiveness of a fund or index based soley on simple corporate governance scores.

Instead, we look for evidence that management "gets the joke" about the effects of globalization on their business, and of providing competitive returns to their shareholders, and shows this with visible action, as going from "poor" to "good" corporate governance can be as powerful a stock price driver as a text-book corporate governance structure--coupled of course with a corresponding improvement in shareholder returns.
]]> Sat, 03 May 2008 00:22:51 -0400
The Japan Corporate Governance Research Institute (JCGR.org) releases annual JCG indices for individual Japanese companies that is available for free. Others like Governance Metrics International, Northern Trust and State Street sell their governance indices to institutions and even to the companies they rate.

Ironically, JCGR has found that Japanese firms with highly rated JCG are more likely to undergo corporate governance reforms after experiencing poor financial performance. However, they admit that the relationship between the JCG Index and performance may actually be negative--thereby indicating the tricky nature of using governance metrics to measure medium-term stock performance.

More ironically, the pitfalls of "cookie cutter" governance rankings are highlighted by the fact that Nomura Holdings topped the JCG Indices in 2006, only to be brought down by an insider trading and other scandals that will hurt their investment banking business. In addition, the JCG indices cover 312 of some 3,800 listed Japanese companies.

Thus a corporate governance "score" is only one, and a tricky one at that, to measure the quality of management and corporate governance--and an even trickier way of measuring potential stock price performance. A better measurement might be foreign ownership (and the corporate governance pressures that implies) and the lack of stable domestic shareholders, such as a parent company or Japanese banks/insurance companies.

At any rate, good corporate governance is only one (increasingly important) factor to consider when picking stocks, and I have my doubts about the effectiveness of a fund or index based soley on simple corporate governance scores.

Instead, we look for evidence that management "gets the joke" about the effects of globalization on their business, and of providing competitive returns to their shareholders, and shows this with visible action, as going from "poor" to "good" corporate governance can be as powerful a stock price driver as a text-book corporate governance structure--coupled of course with a corresponding improvement in shareholder returns.
]]> http://seekingalpha.com/article/73151/comments?source=feed#comment-157769 157769 Mon, 28 Apr 2008 05:42:21 -0400 http://seekingalpha.com/article/68797/comments?source=feed#comment-129564 129564
Since the yen is only strong against the falling US dollar, profits of companies with high export exposure to the US would be hit the worst--both from falling US demand and a strong yen. That includes automobiles and consumer as well as industrial electronic companies. In terms of general sectors, that means automobiles and electronics. However, since both are major drivers of total Japanese profits, aggregate Japanese profits will also be hit. ]]> Thu, 20 Mar 2008 19:51:36 -0400
Since the yen is only strong against the falling US dollar, profits of companies with high export exposure to the US would be hit the worst--both from falling US demand and a strong yen. That includes automobiles and consumer as well as industrial electronic companies. In terms of general sectors, that means automobiles and electronics. However, since both are major drivers of total Japanese profits, aggregate Japanese profits will also be hit. ]]> http://seekingalpha.com/article/68787/comments?source=feed#comment-128001 128001
Its a perfect storm in the currency markets too.

1) The yen carry has unwound as hedge funds blow up,
2) Sovereign Wealth Funds like Qatar which were 99% in USD two years ago are now down to 40% USD exposure,
3) "Bad boy" oil exporters like Iran and Venequela are now asking Japan to pay them in JPY instead of USD
4) US pension funds like CalPERs are reducing USD equities and shifting funds to international bonds, equities away from USD assets.

Ironically, individual Japanese investors are again loading up on USD and other foreign exchange investments on the assumption that the current blow-out in the Yen in will not last long. ]]> Tue, 18 Mar 2008 00:44:53 -0400
Its a perfect storm in the currency markets too.

1) The yen carry has unwound as hedge funds blow up,
2) Sovereign Wealth Funds like Qatar which were 99% in USD two years ago are now down to 40% USD exposure,
3) "Bad boy" oil exporters like Iran and Venequela are now asking Japan to pay them in JPY instead of USD
4) US pension funds like CalPERs are reducing USD equities and shifting funds to international bonds, equities away from USD assets.

Ironically, individual Japanese investors are again loading up on USD and other foreign exchange investments on the assumption that the current blow-out in the Yen in will not last long. ]]> http://seekingalpha.com/article/61841/comments?source=feed#comment-113349 113349
I don't know what your source of data is, but the source of the data for my comments was the Kabushiki Shimbun website
(www.kabushiki.co.jp/ma...), which carries daily TSE 1 sector quotes as well as forward PER and historical PBR and Dvd Yield for 33 sectors. They calculate PBR using the latest full fiscal year consolidated shareholders' equity per share, and the bank sector Arithmatic Stock Price Average.

The Tokyo Stock Exchange also publishes monthly PER and PBR data based on the TSE 1 Arithmatic Stock Price Indices. At the end of December, the book value per share for the TSE 1 Bank sector as calculated by the exchange (on a consolidated basis) was JPY650.80 per share, while the Arithmatic Stock Price Index for the Banks was JPY539.04, resulting in a PBR of 0.83 at the end of December 2007.

The Arithmatic Stock Price Index for the Banks recently fell to the JPY240 level, which works out to a PBR of 0.37X, implying that the Kabushiki Shimbun data is not in error.

Thus I fail to see how my comments could be construed as "sloppy" based on this data. Rather than going into a long explanation about whether the arithmatic stock price averages are better or worse than Topix indices or the Nikkei 225 indices, I believe my point is still valid, i.e., Japanese bank stocks are in aggregate at extremely oversold levels.




]]> Mon, 28 Jan 2008 21:39:36 -0500
I don't know what your source of data is, but the source of the data for my comments was the Kabushiki Shimbun website
(www.kabushiki.co.jp/ma...), which carries daily TSE 1 sector quotes as well as forward PER and historical PBR and Dvd Yield for 33 sectors. They calculate PBR using the latest full fiscal year consolidated shareholders' equity per share, and the bank sector Arithmatic Stock Price Average.

The Tokyo Stock Exchange also publishes monthly PER and PBR data based on the TSE 1 Arithmatic Stock Price Indices. At the end of December, the book value per share for the TSE 1 Bank sector as calculated by the exchange (on a consolidated basis) was JPY650.80 per share, while the Arithmatic Stock Price Index for the Banks was JPY539.04, resulting in a PBR of 0.83 at the end of December 2007.

The Arithmatic Stock Price Index for the Banks recently fell to the JPY240 level, which works out to a PBR of 0.37X, implying that the Kabushiki Shimbun data is not in error.

Thus I fail to see how my comments could be construed as "sloppy" based on this data. Rather than going into a long explanation about whether the arithmatic stock price averages are better or worse than Topix indices or the Nikkei 225 indices, I believe my point is still valid, i.e., Japanese bank stocks are in aggregate at extremely oversold levels.




]]> http://seekingalpha.com/article/59368/comments?source=feed#comment-111799 111799 Sun, 20 Jan 2008 23:16:03 -0500 http://seekingalpha.com/article/55435/comments?source=feed#comment-104740 104740
Yes, demographics is having a major impact on Japan in many ways. Most prefectures (of which there are 47) are experiencing declining populations, a weakening economic base and related lackluster demand for banking services, shrinking property values, and structural local government deficits.

That said, the government actually exacerbated the situation by "stealth" tax hikes, trimmed public services (i.e., no buses for grandma) and a rush-job tightening of regulations on building codes that has essentially stopped the housing market in its tracks. And oh by the way, they would ram through a doubling of VAT hikes in a minute if they thought it would be politically feasible.

They are also clueless as to how to restore Japan's role as an international financial center, even though they desperately would like to. How about tax breaks, easier administrative proceedures, free economic zones, etc., etc.? ]]> Mon, 10 Dec 2007 05:54:53 -0500
Yes, demographics is having a major impact on Japan in many ways. Most prefectures (of which there are 47) are experiencing declining populations, a weakening economic base and related lackluster demand for banking services, shrinking property values, and structural local government deficits.

That said, the government actually exacerbated the situation by "stealth" tax hikes, trimmed public services (i.e., no buses for grandma) and a rush-job tightening of regulations on building codes that has essentially stopped the housing market in its tracks. And oh by the way, they would ram through a doubling of VAT hikes in a minute if they thought it would be politically feasible.

They are also clueless as to how to restore Japan's role as an international financial center, even though they desperately would like to. How about tax breaks, easier administrative proceedures, free economic zones, etc., etc.? ]]> http://seekingalpha.com/article/54637/comments?source=feed#comment-102452 102452
The BOJ is the agent for the MOF in effecting forex intervention, using the Foreign Exchange Fund Special Account, which has two elements, the Foreign Exchange Fund and the narrowly defined Foreign Exchange Special Account. The former is a separate fund prepared for foreign exchange trading by the Government, and purchases/sales of foreign exchange by this fund are not recorded as the revenues/expenses of the Government. In the latter, results of trading such as (1) profits/losses arising from foreign exchange trading and (2) payment/receipt of interest arising from fund-raising/investmen... accompaning foreign exchange intervention are recorded as the revenues/expenses of the Government. In this case, the government issues finance bills to fund the intervention. So, Japan's total debt would technically be affected if it were a sizeable intervention.

As for the impact, in 2001, the BOJ spent $28 billion to prevent the yen from breaking JPY100/US$, and in 2002 had to spend another $33 billion to keep the yen from getting too weak. During this period, the yen swung from JPY105/US$ to JPY135/US$, so the interventions were apparently effective.

In addition, the government is now showing massive capital gains and interest on the forex held that run into the trillions of yen, and some of these profits are being funneled back into the general account to help stop the fiscal bleeding.
]]> Tue, 20 Nov 2007 01:47:59 -0500
The BOJ is the agent for the MOF in effecting forex intervention, using the Foreign Exchange Fund Special Account, which has two elements, the Foreign Exchange Fund and the narrowly defined Foreign Exchange Special Account. The former is a separate fund prepared for foreign exchange trading by the Government, and purchases/sales of foreign exchange by this fund are not recorded as the revenues/expenses of the Government. In the latter, results of trading such as (1) profits/losses arising from foreign exchange trading and (2) payment/receipt of interest arising from fund-raising/investmen... accompaning foreign exchange intervention are recorded as the revenues/expenses of the Government. In this case, the government issues finance bills to fund the intervention. So, Japan's total debt would technically be affected if it were a sizeable intervention.

As for the impact, in 2001, the BOJ spent $28 billion to prevent the yen from breaking JPY100/US$, and in 2002 had to spend another $33 billion to keep the yen from getting too weak. During this period, the yen swung from JPY105/US$ to JPY135/US$, so the interventions were apparently effective.

In addition, the government is now showing massive capital gains and interest on the forex held that run into the trillions of yen, and some of these profits are being funneled back into the general account to help stop the fiscal bleeding.
]]> http://seekingalpha.com/article/46368/comments?source=feed#comment-95689 95689
]]> Tue, 11 Sep 2007 05:57:16 -0400
]]> http://seekingalpha.com/article/46800/comments?source=feed#comment-95687 95687 Mitsubishi Estate and Daibiru were mentioned because of Seeking Alpha's requirement to mention stocks that are traded in the US, which these two are in ADR (OTC) form. Personally, I like Sumitomo Realty (TSE Code: 8830) better because of its higher Beta to bull runs in real estate-related stocks. Mitsubishi Estate is the Cadillac (or Mercedes S550) of the Japanese real estate companies, being landlord of the some of the best commercial properties in Japan, such as the Marunouchi central business district around Tokyo station. ]]> Tue, 11 Sep 2007 05:16:00 -0400 Mitsubishi Estate and Daibiru were mentioned because of Seeking Alpha's requirement to mention stocks that are traded in the US, which these two are in ADR (OTC) form. Personally, I like Sumitomo Realty (TSE Code: 8830) better because of its higher Beta to bull runs in real estate-related stocks. Mitsubishi Estate is the Cadillac (or Mercedes S550) of the Japanese real estate companies, being landlord of the some of the best commercial properties in Japan, such as the Marunouchi central business district around Tokyo station. ]]> http://seekingalpha.com/article/36779/comments?source=feed#comment-87524 87524
If you are a US dollar-based investor investing in a stock that trades in another currency (like the Yen), there are four possible scenarios;

1. The currency and the stock (in yen) appreciates.
2. The stock appreciations but the currency depreciates.
3. The currency appreciates but the stock depreciates.
4. Both depreciate.

Japanese stock prices of major exporters (Toyota, etc.) tend to depreciate when the yen is strong, because it has a directly negative impact on their operating profit, i.e., JPY10 appreciation in the yen against the dollar on an annual basis can mean tens of billions of yen in lost profit.

So while the US dollar-denominated ADR price goes up when the yen appreciates (because of the exchange rate), the stock price in yen tends to depreciate, i.e., scenario (2) as described above.]]> Fri, 01 Jun 2007 21:17:29 -0400
If you are a US dollar-based investor investing in a stock that trades in another currency (like the Yen), there are four possible scenarios;

1. The currency and the stock (in yen) appreciates.
2. The stock appreciations but the currency depreciates.
3. The currency appreciates but the stock depreciates.
4. Both depreciate.

Japanese stock prices of major exporters (Toyota, etc.) tend to depreciate when the yen is strong, because it has a directly negative impact on their operating profit, i.e., JPY10 appreciation in the yen against the dollar on an annual basis can mean tens of billions of yen in lost profit.

So while the US dollar-denominated ADR price goes up when the yen appreciates (because of the exchange rate), the stock price in yen tends to depreciate, i.e., scenario (2) as described above.]]> http://seekingalpha.com/article/36221/comments?source=feed#comment-86826 86826
I would make a distinction between nationality of board members and "global mindset" as compared to the globally competitive nature of the business/products, i.e., is the company really globally competitive or not? I agree with Mitarai-san of Canon that "form over substantance" is not the solution to Japan's corporate governance issues, and for that matter, profitable investments in Japanese stocks.

Sure, Toyota has way too many board members by international "standards", yet they are one of the most respected (feared) automobile company in the world today. A relaively small company like Ushio Electric is also very respected for its niche products where they have global market shares in the 70%~80%. Japan's shipping companies operate in truly global markets and while not perhaps the most competitive firms out there, are nevertheless benefitting very nicely from global trends.

The point that I was trying to make is there is a big difference between firms who are able to leverage (benefit) from global trends as opposed to firms who are basically local clones of successful global business models, which in my mind includes may of the "new economy" Interntet companies listed on the Junior markets whose businesses are now struggling, but for which investors paid high premiums for when they were first listed.]]> Wed, 23 May 2007 09:54:24 -0400
I would make a distinction between nationality of board members and "global mindset" as compared to the globally competitive nature of the business/products, i.e., is the company really globally competitive or not? I agree with Mitarai-san of Canon that "form over substantance" is not the solution to Japan's corporate governance issues, and for that matter, profitable investments in Japanese stocks.

Sure, Toyota has way too many board members by international "standards", yet they are one of the most respected (feared) automobile company in the world today. A relaively small company like Ushio Electric is also very respected for its niche products where they have global market shares in the 70%~80%. Japan's shipping companies operate in truly global markets and while not perhaps the most competitive firms out there, are nevertheless benefitting very nicely from global trends.

The point that I was trying to make is there is a big difference between firms who are able to leverage (benefit) from global trends as opposed to firms who are basically local clones of successful global business models, which in my mind includes may of the "new economy" Interntet companies listed on the Junior markets whose businesses are now struggling, but for which investors paid high premiums for when they were first listed.]]> http://seekingalpha.com/article/31801/comments?source=feed#comment-84945 84945
Your suggestion is a good one given that that our portfolio of "core" REIT stocks (i.e., those that were first listed) is showing the best YTD 2007 performance of any other Japanese equity group year-to-date (up 26%) and (up 73%) since the model portfolio was launched in November 2004.

The REITs first listed (some 14) are stronger because they were the earlier movers, i.e., they acquired commercial properties in central Tokyo locations (Tokyo's 23 wards) for very attractive prices, well before the "hot" money began arriving.

However, since Japan Investor is a subscription site, I'm afraid information on specific REITs is only available to subscribers.

Regards,
Darrel]]> Wed, 25 Apr 2007 11:20:24 -0400
Your suggestion is a good one given that that our portfolio of "core" REIT stocks (i.e., those that were first listed) is showing the best YTD 2007 performance of any other Japanese equity group year-to-date (up 26%) and (up 73%) since the model portfolio was launched in November 2004.

The REITs first listed (some 14) are stronger because they were the earlier movers, i.e., they acquired commercial properties in central Tokyo locations (Tokyo's 23 wards) for very attractive prices, well before the "hot" money began arriving.

However, since Japan Investor is a subscription site, I'm afraid information on specific REITs is only available to subscribers.

Regards,
Darrel]]> http://seekingalpha.com/article/33273/comments?source=feed#comment-84823 84823
According to the IMF's attempt to measure the yen carry trade, the bulk of this carry trade is not "speculation" but individual Japanese investors buying offshore investments denominated in high yielding currencies. In Asia, for example, a Japanese investor can earn 6.8% on demand deposits while also enjoying an appreciating Auzzie dollar against the yen. Japanese fund management companies are creating mutual funds with monthly payouts that have various bells and whistles to be able to make the monthly payouts, which is also contributing.

I found this attempt to get a balanced view of the carry trade a bit refreshing.
tmcgee.wordpress.com/2.../]]> Tue, 24 Apr 2007 08:18:21 -0400
According to the IMF's attempt to measure the yen carry trade, the bulk of this carry trade is not "speculation" but individual Japanese investors buying offshore investments denominated in high yielding currencies. In Asia, for example, a Japanese investor can earn 6.8% on demand deposits while also enjoying an appreciating Auzzie dollar against the yen. Japanese fund management companies are creating mutual funds with monthly payouts that have various bells and whistles to be able to make the monthly payouts, which is also contributing.

I found this attempt to get a balanced view of the carry trade a bit refreshing.
tmcgee.wordpress.com/2.../]]> http://seekingalpha.com/article/33116/comments?source=feed#comment-84822 84822
"Materials" means basic materials stocks. As in the S&P "Materials" SPDR (ticker XLB), basic materials includes such industries as chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products. Apologies for the mis-spelling of Tokyo Electron, which has no ADR (American Depository Receipt), and thus no ticker was given.]]> Tue, 24 Apr 2007 08:06:29 -0400
"Materials" means basic materials stocks. As in the S&P "Materials" SPDR (ticker XLB), basic materials includes such industries as chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products. Apologies for the mis-spelling of Tokyo Electron, which has no ADR (American Depository Receipt), and thus no ticker was given.]]> http://seekingalpha.com/article/31901/comments?source=feed#comment-83893 83893
I would like to know more about your deeply-rooted skepticism concerning investing in Japan's stock market vis-a-vis the Economic Time™ and the conjecture therein that Japanese stocks are not market-(ergo investor) friendly. Granted, Japan has always been somewhat of an outlier in terms of fitting into global macro models. Yet foreign investors who have taken the time to get below top-down allocation decisions seem to be making money. If not, Japan would have been abandoned long ago as a destination for global portfolio investment flows.

Foreign investment flows continue to be a major driver of Japanese stock prices. Is this merely a function of simple top-down investment allocation decisions? Is Japan merely an afterthought/risk hedge against what is happening in global equity markets? We think not. There has to be something behind the massive portfolio investment inflows into Japan equities beyond mere excess savings/liquidity sloshing around in global markets.

For example, after the sell-off in mid-year 2006, why did European investors become the major net purchasers of Japanese equities after US investors took profits?, and in 2007, why have Asian investors become the major net buyers of Japanese equities? Might not this have something to do with the massive excess savings of Asian and GCC (Gulf Cooperative Gouncil) states' expressed wish to reduce their currently heavy overweighting in the US dollar?

Or could this be because the Japanese market as expressed by the US$ "EWJ" ETF has outperformed the S&P 500 since 2003, despite the Yen carry trade-induced structural weakness in the Yen?]]> Tue, 10 Apr 2007 11:15:59 -0400
I would like to know more about your deeply-rooted skepticism concerning investing in Japan's stock market vis-a-vis the Economic Time™ and the conjecture therein that Japanese stocks are not market-(ergo investor) friendly. Granted, Japan has always been somewhat of an outlier in terms of fitting into global macro models. Yet foreign investors who have taken the time to get below top-down allocation decisions seem to be making money. If not, Japan would have been abandoned long ago as a destination for global portfolio investment flows.

Foreign investment flows continue to be a major driver of Japanese stock prices. Is this merely a function of simple top-down investment allocation decisions? Is Japan merely an afterthought/risk hedge against what is happening in global equity markets? We think not. There has to be something behind the massive portfolio investment inflows into Japan equities beyond mere excess savings/liquidity sloshing around in global markets.

For example, after the sell-off in mid-year 2006, why did European investors become the major net purchasers of Japanese equities after US investors took profits?, and in 2007, why have Asian investors become the major net buyers of Japanese equities? Might not this have something to do with the massive excess savings of Asian and GCC (Gulf Cooperative Gouncil) states' expressed wish to reduce their currently heavy overweighting in the US dollar?

Or could this be because the Japanese market as expressed by the US$ "EWJ" ETF has outperformed the S&P 500 since 2003, despite the Yen carry trade-induced structural weakness in the Yen?]]> http://seekingalpha.com/article/30047/comments?source=feed#comment-83105 83105
Remember Y2K and all of the "smart guys" telling us how this would bring down the civilized world? The Fed and other central banks reacted by providing massive amounts of liquidity to ensure the "doomsday" scenario would not come to pass...what a great stimulous for global stock markets!

The Japanese political scene makes for greate media coverage and speculaton among foreign investors, but has precious little to do with what goes on in the realy economy--and therefore only has a passing impact on the stock market. This is because politics in Japan is largely irrelavent to
what is actually going on in the real economy! For a reality check, all you have to do is track what Japanese politicians actually do versus what they say. At the end of the day, political action in Japan inevitably gravitates toward what is considered the best solution for Japanese business and the financial markets, i.e., a very investor -friendly compromise...]]> Mon, 26 Mar 2007 11:59:57 -0400
Remember Y2K and all of the "smart guys" telling us how this would bring down the civilized world? The Fed and other central banks reacted by providing massive amounts of liquidity to ensure the "doomsday" scenario would not come to pass...what a great stimulous for global stock markets!

The Japanese political scene makes for greate media coverage and speculaton among foreign investors, but has precious little to do with what goes on in the realy economy--and therefore only has a passing impact on the stock market. This is because politics in Japan is largely irrelavent to
what is actually going on in the real economy! For a reality check, all you have to do is track what Japanese politicians actually do versus what they say. At the end of the day, political action in Japan inevitably gravitates toward what is considered the best solution for Japanese business and the financial markets, i.e., a very investor -friendly compromise...]]> http://seekingalpha.com/article/28295/comments?source=feed#comment-83104 83104
Our data shows Steel investments in 37 Japanese companies, and there is no shortage of potential financiers who would like to ride of Steel's coattails. In addition, considering that hedge funds investing in Japan using traditional (eg, long/short strategies) lost money in 2006, more than a few of such hedge funds are considering becoming "activist" investors, given the obvious success of such strategies so far.]]> Mon, 26 Mar 2007 11:47:57 -0400
Our data shows Steel investments in 37 Japanese companies, and there is no shortage of potential financiers who would like to ride of Steel's coattails. In addition, considering that hedge funds investing in Japan using traditional (eg, long/short strategies) lost money in 2006, more than a few of such hedge funds are considering becoming "activist" investors, given the obvious success of such strategies so far.]]> http://seekingalpha.com/article/28742/comments?source=feed#comment-83101 83101
Yes, after the stock tanked from JPY2,870 to JPY2,310 (19.5%), and the ADR is down some 4% since (from your March 9 call), so your Nomura trade is now up only 6%. From where do you want to start measuring whether yours is longer than mine?]]> Mon, 26 Mar 2007 11:27:12 -0400
Yes, after the stock tanked from JPY2,870 to JPY2,310 (19.5%), and the ADR is down some 4% since (from your March 9 call), so your Nomura trade is now up only 6%. From where do you want to start measuring whether yours is longer than mine?]]> http://seekingalpha.com/article/28315/comments?source=feed#comment-81926 81926 Thu, 01 Mar 2007 03:59:04 -0500 http://seekingalpha.com/article/27424/comments?source=feed#comment-81789 81789
There is ample evidence that Japan's labor market is tight, and that this is more than a shift from retiring baby boomers with full benefits to "burger flipping" younger workers. Moreover, the government's household survey is notorious for distorting underlying consumption trends, while further distortion is being added by the wave of retiring baby boomers, i.e., the 60-ish part of the labor force.

Thirdly, a GDP surprise for Japan does not require a so-called "consumer spending binge". All is required for a "growth scare" is firmer consumption that currently overly-bearish assumptions assume, which is implied in the comments about domestic demand in a mature (i.e., ex-growth) economy. After all, if currency traders could believe that the end of quantitative easing and a modest tightening of short-term rates by the BOJ (i.e., the end of ZIRP) could destroy the current climate of global excess liquidity (and the fundamentals behind the yen carry trade) with the stroke of a pen, they are just as gullible about an ostensible re-appraisal of Japan's potential growth rate and the implications this may have on BOJ policy.]]> Sun, 25 Feb 2007 04:06:11 -0500
There is ample evidence that Japan's labor market is tight, and that this is more than a shift from retiring baby boomers with full benefits to "burger flipping" younger workers. Moreover, the government's household survey is notorious for distorting underlying consumption trends, while further distortion is being added by the wave of retiring baby boomers, i.e., the 60-ish part of the labor force.

Thirdly, a GDP surprise for Japan does not require a so-called "consumer spending binge". All is required for a "growth scare" is firmer consumption that currently overly-bearish assumptions assume, which is implied in the comments about domestic demand in a mature (i.e., ex-growth) economy. After all, if currency traders could believe that the end of quantitative easing and a modest tightening of short-term rates by the BOJ (i.e., the end of ZIRP) could destroy the current climate of global excess liquidity (and the fundamentals behind the yen carry trade) with the stroke of a pen, they are just as gullible about an ostensible re-appraisal of Japan's potential growth rate and the implications this may have on BOJ policy.]]>