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Japan is the latest country to embark on aggressive expansion of its money supply. In the last few months the bold monetary policy initiative from the newly installed prime Minister of Japan, translated into an immediate depreciation of the yen versus the US dollar and at the same time a huge uptick in Japanese share prices.
In the 1970’s Japan experienced high monetary growth. This led to a major bubble in the property and stock market, culminating in the Nikkei 225 index reaching 38 900 in late 1989. Then the Bank of Japan put on the brakes in order to reign in the monetary supply. The stock market and property bubble burst and the economy went into recession. The stock market index went into a long term decline from its peak to an eventual low of 7055 in March 2009. At its peak, the Japanese share market comprised 45% of the MSCI World index. It has now fallen to just 8%.
The Japanese economy has been in general recession over the last two decades, despite the fact that the Bank of Japan ran a zero interest rate policy for much of this time. This is possibly because prices have been in decline and therefore real interest rates were actually too high – i.e. monetary policy was actually tight throughout most of this period, leading to a strong currency. Price deflation and a strong currency encouraged high savings, low investment and in turn on-going deflation.
Renowned economist Milton Friedman said this in a speech in 2000, “As far as Japan is concerned, the situation is very clear...They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high-powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy. Bold monetary policy achieved through the cooperation of the government and the Bank of Japan will be indispensable for breaking away from deflation and the appreciating yen.”
Following years of half-hearted attempts to stimulate the weak economy, the new leadership has taken up on Friedman’s recommendation. The new Japanese Prime Minister, Shinzo Abe, together with new leader of the Bank of Japan announced sweeping economic and monetary easing policies - now termed as Abenomics. “Bold monetary policy achieved through the cooperation of the government and the Bank of Japan will be indispensable for breaking away from deflation and the appreciating yen.” -Prime Minister Shinzo Abe, January 11, 2013.
While high inflation is a problem for any economy, even more so is deflation. Japan has been in a deflation scenario for two decades and this latest plan is essentially an attempt to break the back of deflation in the economy.
The deflation environment has hampered business growth and according to BCA Research, the total amount of corporate profits today is essentially the same as 20 year ago, compared to the US, which is up 5 times. See chart below.
Source : BCA Research
The announcement sparked a depreciation in the yen against the USD from around 83 yen to its current 98 yen to the dollar. BCA Research estimates that this decline should translate into about a 35% increase in corporate profits for Japanese companies. The announcements led to a sharp uptick in prices with the Nikkei 225 index up from around 9 000 in November to the current level of around 13200.
The Japanese Nikkei 225 index
Will bold monetary policy work?
While the announcement of the impending monetary supply has proved positive for Japan, there is a growing degree of scepticism globally that the large scale aggressive monetary policy that the US, Europe and now Japan have embarked upon will lead to possible disastrous consequences.
So far it has had the exact intended result in Japan and should it prove to be sustainable, maybe just maybe Japanese companies may prove to be global winners.
Kind regards
Ian de Lange
Seed Investments
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton") South African stocks booked their biggest one-day drop in two months on Wednesday, falling 1.9 percent as nervous investors continued to sell mining companies such as Anglo American on worries over commodities prices. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2013-04-17T160527Z_1_AJOE93G18PC00_RTROPTP_3_OZABS-MARKETS-SAFRICA-RAND-20130417.JPG "A South African child holds a 50 rand note July 2. The rand sank to a fresh low against the dollar i..") South Africa's government bonds edged higher and yields fell sharply on Wednesday, partly driven by inflation data which backs the case for domestic monetary policy to stay accommodative. Full story |
 Investigators of the Boston
Marathon bombings believe they have identified a suspect from
security video taken before Monday's blasts killed three people
and injured 176 others, a U.S. law enforcement source said on
Wednesday. Full story  /p> Full story  The World Health
Organization said on Wednesday that a number of people who have
tested positive for a new strain of bird flu in China appear to
have had no contact with poultry, adding to the mystery about a
virus that has killed 17 people to date. Full story |
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Markets |
World equity markets and
commodities fell on Wednesday as global growth concerns
continued to take a heavy toll on investor sentiment and
disappointing earnings. . . Full story |
European shares fell to their
lowest levels so far this year on Wednesday on fresh concerns
over the global economy that led some. . . Full story |
Britain's top share index
slipped to a 10-week closing low on Wednesday, pulled down by
resource stocks on mounting concerns that global growth. . . Full story |
U.S. stocks dropped 1 percent
in a broad decline on Wednesday, with materials and energy
shares leading the way lower as commodity prices. . . Full story | |||
European shares extended their
losses to fall to new intraday lows on Wednesday, in a broad
sell-off which tracked a similar sharp fall. . . Full story |
U.S. stocks extended losses
on Wednesday, with the top equity indexes down more than 1
percent after a batch of disappointing earnings reports. . . Full story |
U.S. stocks fell at the open
on Wednesday after several disappointing earnings reports and
another drop in commodity prices.. . . Full story |
European shares fell for the
fourth straight session on Wednesday in a broad selloff led by
mining and industrial stocks, as brewing concerns. . . Full story | ||||
SA Business |
De Beers, a unit of miner Anglo American, said production at its Venetia diamond mine, the biggest in South Africa, should return to normal in the second half of 2013, keeping its production steady at 2012 levels.. . . Full story |
South Africa's rand and government bonds steadied in early Wednesday trade, as investors kept to the sidelines ahead of the release of inflation data at 0800 GMT.. . . Full story | |||||
Growth in South Africa's retail sales accelerated to a five month high of 3.8 percent year-on-year in February from a revised. . . Full story | Yields on South African government bonds fell after lower-than-expected inflation data on Wednesday, with the 2026 benchmark bond hitting an all. . . Full story | Miner Petra Diamonds said it recovered a high-quality 25.5-carat blue diamond at its Cullinan mine in South Africa, sending its shares. . . Full story | South Africa's headline consumer inflation undershot market expectations in March, coming in unchanged at 5.9 percent year-on-year compared with February, data. . . Full story |
South African fixed line operator Telkom said on Tuesday it had agreed to pay a 449 million rand fine handed down by regulators last year for uncompetitive behaviour.. . . Full story | South Africa's Zeder Investments plans to acquire Total Produce's holding in the Capespan Group, South Africa's biggest fruit exporter, the company said on Wednesday.. . . Full story |
Company News |
The following Offering Circular has been approved by the UK Listing Authority and is available for viewing: Offering Circular dated 17. . . Full story |
Shareholders are hereby advised that a reasonable degree of certainty exists that Pioneer Foods' earnings and headline earnings per share for. . . Full story |
Shareholders were advised that, at the Annual General Meeting of RBPlat held at the Castello room at the Palazzo Hotel, Monte. . . Full story |
Business Day reported that one of insurer's Liberty's main objectives this year is to broaden its presence in Africa, including launching. . . Full story | |||
Shareholders were advised that, with immediate effect, non-executive director, Andrew Brooking has been appointed as a member of the Audit and. . . Full story |
AMAPS refers to the SENS announcement dated 29 January 2013 regarding the retirement of Mr. Des Olivier. AMAPS shareholders were advised. . . Full story |
Resgen released its quarterly report for the three months ended 31 March 2013.
Present status
* Mine construction activities have commenced, with. . . Full story |
Coal advised that Michael Meeser has been appointed as CFO and executive director with effect from 1 June 2013.. . . Full story | ||||
Company Results | Revenue increased to R1.9 billion (R1.8 billion). Earnings before interest, taxation, depreciation and amortisation ("EBITDA") declined to R126.3 million (R145.2 million) and operating profit was lower at R106.2 million (R123.4 million). Total comprehensive income attributable to ordinary shareholders decreased to R77.3. . . Full story | Revenue increased to R969.7 million (R763.5 million). Gross profit was higher at R258.3 million (R202.8 million) and earnings before interest, taxation, depreciation and amortisation ("EBITDA") rose to R123.9 million (R97.4 million). Net attributable profit was more than 25% higher at R70.1. . . Full story |
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Click here for the Sharenet Spot Price page
| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 17/04/2013 | 118 | 200 | 77 | 395 | 233,706,420 | R16,079,679,516 | 197306 | 1415110 |
| 16/04/2013 | 238 | 117 | 65 | 420 | 232,222,787 | R14,310,776,992 | 167066 | 1306807 |
| 15/04/2013 | 91 | 287 | 69 | 447 | 284,141,621 | R17,712,234,515 | 207908 | 1183435 |
| 12/04/2013 | 111 | 221 | 72 | 404 | 201,430,523 | R13,441,435,358 | 155244 | 443874 |
| 11/04/2013 | 172 | 163 | 75 | 410 | 184,027,308 | R11,818,657,405 | 136975 | 1244316 |
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Latest Consensus Changes**
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| Date | Time | Headline |
| 17/04/2013 | 17:39 | ABSA BANK LIMITED - ABN58 - Interest Rate Reset |
| 17/04/2013 | 17:34 | ABSA BANK LIMITED - ABN48 - Interest Rate Reset |
| 17/04/2013 | 17:30 | BARLOWORLD LIMITED - BAW12 and BAW13 - Interest Rate Reset |
| 17/04/2013 | 17:29 | NEDBANK LIMITED - Final Distribution - STXNII |
| 17/04/2013 | 17:15 | TOYOTA FIN SERVICES (SA) PTY LTD - New Instrument Listing - TFS110 |
| 17/04/2013 | 17:15 | IVUZI INVESTMENTS LIMITED - Interest Rate Reset - IV02E |
| 17/04/2013 | 16:40 | ANGLO AMERICAN PLC - Publication of Offering Circular |
| 17/04/2013 | 16:30 | PREMIUM PROPERTIES LIMITED - Circular to Premium linked unitholders |
| 17/04/2013 | 16:22 | ZEDER INVESTMENTS LIMITED - Acquisition Of Shareholding In Capespan Group Limite... |
| 17/04/2013 | 16:00 | THE SPAR GROUP LIMITED - Notice of a disposal of a beneficial interest in Spar s... |
| 17/04/2013 | 16:00 | PIONEER FOOD GROUP LIMITED - Earnings Guidance |
| 17/04/2013 | 15:26 | SIBANYE GOLD LIMITED - Director's dealing in securities |
| 17/04/2013 | 15:02 | GROWTHPOINT PROPERTIES LIMITED - GRT03 - Interest Rate Reset |
| 17/04/2013 | 15:00 | ROYAL BAFOKENG PLATINUM LIMITED - Results of Annual General Meeting |
| 17/04/2013 | 14:25 | INDEQUITY GROUP LIMITED - Trading statement for the six months ended 31 March 20... |
| 17/04/2013 | 14:22 | SEKUNJALO INVESTMENTS LIMITED - Trading statement |
| 17/04/2013 | 14:11 | MPACT LIMITED - Dealings In Securities By A Director |
| 17/04/2013 | 13:34 | Transnet SOC Limited - Commercial Paper Issue - TSP140 |
| 17/04/2013 | 13:33 | Transnet SOC Limited - Commercial Paper Issue - TSP139 |
| 17/04/2013 | 13:20 | GROWTHPOINT PROPERTIES LIMITED - Offer for the property assets of Fountainhead P... |
| 17/04/2013 | 12:43 | HOSPITALITY PROPERTY FUND LIMITED - Transaction update: Acquisition of the Radis... |
| 17/04/2013 | 12:19 | VIVIDEND INCOME FUND LIMITED - Disclosure of disposal of securities |
| 17/04/2013 | 12:07 | AVENG LIMITED - Results of general meeting |
| 17/04/2013 | 12:00 | ISA HOLDINGS LIMITED - Results of general meeting |
| 17/04/2013 | 11:47 | ROLFES HOLDINGS LIMITED - Dealing in Securities by an Associate of a Director of... |
| 17/04/2013 | 11:30 | PSG GROUP LIMITED - Dealing in securities by the PSG Group Limited Supplementary... |
| 17/04/2013 | 11:15 | TIMES MEDIA GROUP LIMITED - Dealing in shares by an associate of a director |
| 17/04/2013 | 10:19 | KAP INDUSTRIAL HOLDINGS LIMITED - Dealing in securities by an associate of a dir... |
| 17/04/2013 | 09:49 | NORTHAM PLATINUM LIMITED - Unprotected work stoppage at Zondereinde Mine continu... |
| 17/04/2013 | 09:48 | ONELOGIX GROUP LIMITED - Chnages to the board of directors |
| 17/04/2013 | 09:46 | AMALGAMATED APPLIANCE HOLDINGS LD - Update to a Change to the Board Of Directors |
| 17/04/2013 | 09:05 | RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 31 Mar... |
| 17/04/2013 | 08:03 | ZEDER INVESTMENTS LIMITED - Acquisition Of Shareholding In Capespan Group Limite... |
| 17/04/2013 | 07:26 | BHP BILLITON PLC - BHP Billiton Production Report for the Nine Months Ended 31 M... |
| 17/04/2013 | 07:06 | BHP BILLITON PLC - BHP Billiton Exploration and Development Report for the Quart... |
| 17/04/2013 | 07:05 | CONSOLIDATED INFRASTRUCTURE GRP LTD - Unaudited Condensed Consolidated Intdrim R... |
| 17/04/2013 | 07:05 | BRITISH AMERICAN TOBACCO PLC - Transaction in own shares |
| 17/04/2013 | 07:05 | COAL OF AFRICA LIMITED - Finance Director Appointed |
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