The Bank of Japan’s (BOJ) failed negative interest rate policy (NIRP) is provoking increased opposition among the big banks and the Financial Services Agency (FSA), the ministry which protects them
As the initial proposer and a behind-the-scenes advisor on Japan’s Corporate Governance Code, I am naturally pleased with the progress that the country has made in the past two years. This is of course relative to the rather low bar that was set by the previous fifteen years in which we governance advocates made comparatively little progress, against enormous resistance from the industrial lobby.
Key points of this report, - The current profits of Japanese corporations have fallen in the last three quarters. For all corporations, current profits are down 16% from April-June 2015 - Among manufacturers, who are the biggest multinationals, profits are down a whopping 29% from three quarters ago to a level first reached 13 years ago in 2003 - In part, profits are down because sales have slumped, but an even bigger reason for the plunge in profits is that the ratio of profits-to-sales is down 13.5% from its peak in April-June 2015 - The roller coaster ride of the yen’s value has played a pivotal role in the roller coaster ride of profits; over the last five years, there has been a stunningly high 95% correlation between the profits:sales ratio and the value of the yen - Most of the impact of the ups and downs of the yen on profits is a pure accounting illusion, but one that, for a while, misled many foreign investors
Richard Katz's the Oriental Economist April 2016 issue includes reports Playing Trade Poker with Trump, Will a ‘double-election’ follow this summer - Second Tax Delay, Sad Shunto, Fiscal Straits Pit Elderly Against Children- Daycare Dilemma, and Pharaonic Construction Program - Call of the Crane.
Richard Katz's March 2016 issue of the Oriental Economist. Topics include Abe’s Approval: A Mile Wide, Just An Inch Deep, So Strong and Yet So Weak; Negative Rate Backfire, Tax Postponement Mulled; Raising Profits without Raising Sales, A New Bottom Line; Nuke Power Plans Don’t Add Up and Flood of New Diet Members Decimates LDP ‘Old Guard’ - Abe’s New Conservativism
Key points: - Court decision ordering shutdown of two nuclear reactors will likely just delay, rather than prevent, restarting many of Japan’s reactors - High courts will likely maintain their past rulings that lower courts must defer to the expertise of the nuclear regulators - Still, the decision could lead to other court cases causing further delays and more costs for the utilities - If the courts make the utilities add additional safety measures, that could lead the utilities to lessen the number of reactors they find financially viable - Tomorrow is the fifth anniversary of the march 2011 Fukushima disaster, and only two nuclear reactors are back in operation, far less than any pro-nuclear policymaker to whom we spoke expected by this time - The Abe administration policy is to have nuclear power supply 20-22% of all electricity in Japan by 2030; this goal is unlikely to be met
Key points: - As we expected, public disenchantment has grown as Abenomics failed to deliver on its promises; in a new Nikkei poll, 50% of respondents said they were dissatisfied - However, we were wrong in our expectation that disenchantment with Abenomics would propel a steady erosion of Abe’s overall approval ratings; over the last year, approval has stabilized at around 40-50%, a high level for a PM with Abe’s tenure - There is growing expectation that Abe will call—and win—a double-election this summer of both Upper and Lower House; Abe will not, however, secure a two-thirds majority in both Houses needed to revise the Constitution