Accounting Illusion No Longer Works in Corporate's Favor Profits Slide on Yen Reversal

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

How Will BOJ Respond to Return of Deflation?

By one measure, deflation, like the swallows at Capistrano, has returned to Japan. According to the official target of the Bank of Japan (BOJ)—the consumer price index (CPI) except for fresh food—prices fell -0.1% in August from last year. This is the first time Japan has seen deflation since April 2013.

The U.S. Dollar and International Economic Conditions

FMI's quick analysis on the economic condition around the world.

Who Wins, Who Loses?

In this report Richard analyzes who has gained and who has lost because of the yen’s big depreciation.

TOE Alert: Offshoring Continues to Grow Despite Weak Yen

Richard analyzes the reason behind Japanese multinational companies' growing trend to produce in overseas countries, especially in Asia, despite the weakening yen.

Kuroda’s “Hail Mary” pass

In the face of a growing loss of faith in the Bank of Japan’s ability to either achieve its 2% inflation target in the foreseeable future or to help boost real growth—and even snarky passages in the press about BOJ Governor Haruhiko Kuroda “stealthily extending the deadline for exiting deflation”—Kuroda threw a “Hail Mary” pass.

Japan Financial Markets Moved by U.S. Events

The ups and downs of Japanese stocks have closely mirrored those in the US since August.

Currencies and Japanese Vs. Korean Exports

One of the big surprises to most economists was how little Japan’s exports have responded to the 22% depreciation of the yen since autumn 2012.

Yen Weakens on US Interest Rate Speculation

After spending month after month in the ¥102/$ range, the yen finally seemed to resume to depreciation on which the Abe team is counting so much. It’s a small breakout: just a couple percentage points to the ¥105/$ range, the cheapest the yen has been since last December

Is Electricity Shortfall Deindustrializing Japan?

Exports Still Down; MFG. Capacity Shrinking