It seems the 10 trillion yen fiscal stimulus was a mirage. According to a leak story carried by Nikkei on July 26, the government is planning to budget only 2 trillion yen in the supplementary budget, the bulk of which will be spent on old fashioned public works. Absent a large fiscal stimulus, a monetary expansion will likely have limited effects. The BoJ is likely to stop short of implementing a drastic easing measures this Friday. Read more..
The Japanese export to EU is gaining strength. The export volume to EU was up by 8% year on year in June, providing a rare bright spot among the generally stagnant export activities. However, it is unlikely that exports to EU alone could change the overall direction of Japan's export. Exports to EU accounts for mere 10% of the total, and the sustainability of its strength is also suspect as the world assess the Brexit impact. Read more..
It is a close call, but we think the BoJ is unlikely to ease in its monetary policy meeting on July 28-29. Aside from minor measures such as including municipal bonds or agency bonds in its asset purchase program, there are only a few meaningful easing measures the BoJ could undertake. They are, 1.cutting its policy rate, 2.expanding ETF purchases, 3.expanding its JGB purchases. However, all these measures have costs, and we think the BoJ is likely to judge that costs outweigh their benefit at this moment. So, expect Kuroda to surprise the market... again. Read more..
The inbound international tourism in Japan saw a tremendous growth in the last three years. In terms of aggregate spending by foreign visitors, it has nearly tripled in the last 3 years. However, the industry is starting to feel the pinch from the appreciating yen. In the April-June quarter, the per capita spending by foreign visitors has fallen by 9.9% from a year ago. The per capital spending by Chinese nationals have fallen by 22.9%. While the number of foreign visitors are still growing, maintaining the growth rate would be a struggle now that the yen factor has turned from a tail wind to a head wind. Read more..
The Japanese government started a new indicator to monitor the price development in the commercial property market in Japan. Overall, the property market has risen by 17% since early 2013. While prices of properties with structures such as retail properties have risen robustly, prices of properties without structures have hardly risen until quite recently. Read more..