11-05-2013, 10:10 AM
Abenomics is having a huge impact on Japan and rippling effects on other countries. As Japan has been battling deflation for 2 decades and its success - a copycat version of QE from US will trigger other countries to follow suit. Australia is the latest copycat and global asset inflation set to continue from here. Maintain bullish outlook to 2016/17 - the 10 year anniversary of the last crisis.
Yen's Fall Trickles Through Economy
By Phred Dvorak, Kana Inagaki and Yoree Koh
814 words
11 May 2013
Dow Jones Top Global Market Stories
DJTGMS
English
Copyright © 2013 Dow Jones & Company, Inc.
TOKYO -- Just over a month after Japan's central bank vowed to reignite economic growth by flooding markets with yen, the currency fell to 100 yen to the dollar for the first time in four years, a milestone in efforts to end nearly two decades of economic stagnation.
The weaker yen's impact -- the dollar has climbed 16% against the currency this year -- is already trickling through the Japanese economy, pushing up prices of imported food and gas and drawing a flood of tourists whose currencies now buy more goods in Japan. It is bolstering sales and profit at exporters whose goods can be produced at lower prices for global markets. Late Thursday in New York, the dollar bought 100.60 yen, compared with 99.02 yen late Wednesday.
The shifts have sent Japan's Nikkei Stock Average soaring 64% since mid-November, including 15% during the past five weeks, since the Bank of Japan said on April 4 it would pump trillions of yen more into the markets each month.
More important, the yen's decline signals hopes for a more groundbreaking economic shift: the reversal of nearly two decades of stagnation, weak demand and declining prices. While Japanese officials insist they haven't been intentionally weakening the yen, its plunge is the direct result of the monetary policies promoted by new Prime Minister Shinzo Abe, who has declared it a central part of his "Abenomics" plan to beat deflation and boost growth.
The yen's fall has been "drastic, but ... at the very least, manufacturers welcome it," said Hiromasa Yonekura, chairman of Sumitomo Chemical Co., as well as Japan's Keidanren business lobby, at a news conference last month. "Stocks too have risen, and next we should see consumption picking up."
Toyota Motor Corp. on Wednesday said a weaker yen boosted its operating profit by 150 billion yen, or about $1.5 billion, during the year ended in March, helping the company triple its net profit to 962.1 billion yen. Currency gains helped provide one of the few bright spots in the earnings of Toshiba Corp., lifting the profitability of the memory chips the company makes in Japan and sells abroad.
Besides lifting exports, a weaker yen could boost income Japanese investors earn overseas, as well as profits from overseas business at the country's exporters when they repatriate their earnings in yen, which in turn could translate into higher wages and increased consumption back home. Some economists said it could also help goose spending on pure optimism that things are improving. The government said last month that a survey of consumer sentiment hit its highest level since May 2007, as did another measure of optimism toward employment conditions.
While inflation is the main concern for many other countries, Japan has been plagued by the opposite problem for years. Falling prices contribute to lower economic activity partly because people hold off on purchases, expecting to get better bargains by waiting. Japan's government hopes to reverse those expectations by flooding the market with yen, thereby boosting prices. Increasing the domestic money supply also has the effect of making the yen less valuable compared with other world currencies.
But the weak yen isn't universally applauded at home, with books titled "The Weak Yen Crisis" and "Will the Country Collapse from Bad Yen Weakening and Massive Inflation!?" at the top of Amazon.com lists.
Many economists caution that if the yen weakens too much, it could do more harm to Japan's struggling economy than good, by boosting too fast the cost of imports like fuel and grains. Even with the weak yen, ramped-up monetary easing and a big dose of public spending from the government, think tank Japan Center for Economic Research's revised economic outlook shows only a slight improvement in economic growth and price rises two years from now, with the consumer-price index logging only 0.6% average annual growth, a far cry from the Bank of Japan's target of 2%.
Japan's retailers are likely to resist raising prices as long as they can, for fear of killing off fragile demand, pinching profits and wages in the process.
Japanese udon noodle chain Hanamaru Inc. said it is struggling to keep the price of its cheapest bowl of noodles at 105 yen amid rising imported flour prices and has set up a cost-cutting committee to figure out how.
Credit-rating firm Moody's Investors Service issued a cautionary report last month, saying that though the weaker yen might help corporate profitability, the effects are likely to be short-lived. The Bank of Japan move and the yen's weakening "merely buys the government time to implement and gain traction from a credible structural economic reform," the credit firm said.
Dow Jones & Company, Inc.
Document DJTGMS1120130510e95a0008q
Yen's Fall Trickles Through Economy
By Phred Dvorak, Kana Inagaki and Yoree Koh
814 words
11 May 2013
Dow Jones Top Global Market Stories
DJTGMS
English
Copyright © 2013 Dow Jones & Company, Inc.
TOKYO -- Just over a month after Japan's central bank vowed to reignite economic growth by flooding markets with yen, the currency fell to 100 yen to the dollar for the first time in four years, a milestone in efforts to end nearly two decades of economic stagnation.
The weaker yen's impact -- the dollar has climbed 16% against the currency this year -- is already trickling through the Japanese economy, pushing up prices of imported food and gas and drawing a flood of tourists whose currencies now buy more goods in Japan. It is bolstering sales and profit at exporters whose goods can be produced at lower prices for global markets. Late Thursday in New York, the dollar bought 100.60 yen, compared with 99.02 yen late Wednesday.
The shifts have sent Japan's Nikkei Stock Average soaring 64% since mid-November, including 15% during the past five weeks, since the Bank of Japan said on April 4 it would pump trillions of yen more into the markets each month.
More important, the yen's decline signals hopes for a more groundbreaking economic shift: the reversal of nearly two decades of stagnation, weak demand and declining prices. While Japanese officials insist they haven't been intentionally weakening the yen, its plunge is the direct result of the monetary policies promoted by new Prime Minister Shinzo Abe, who has declared it a central part of his "Abenomics" plan to beat deflation and boost growth.
The yen's fall has been "drastic, but ... at the very least, manufacturers welcome it," said Hiromasa Yonekura, chairman of Sumitomo Chemical Co., as well as Japan's Keidanren business lobby, at a news conference last month. "Stocks too have risen, and next we should see consumption picking up."
Toyota Motor Corp. on Wednesday said a weaker yen boosted its operating profit by 150 billion yen, or about $1.5 billion, during the year ended in March, helping the company triple its net profit to 962.1 billion yen. Currency gains helped provide one of the few bright spots in the earnings of Toshiba Corp., lifting the profitability of the memory chips the company makes in Japan and sells abroad.
Besides lifting exports, a weaker yen could boost income Japanese investors earn overseas, as well as profits from overseas business at the country's exporters when they repatriate their earnings in yen, which in turn could translate into higher wages and increased consumption back home. Some economists said it could also help goose spending on pure optimism that things are improving. The government said last month that a survey of consumer sentiment hit its highest level since May 2007, as did another measure of optimism toward employment conditions.
While inflation is the main concern for many other countries, Japan has been plagued by the opposite problem for years. Falling prices contribute to lower economic activity partly because people hold off on purchases, expecting to get better bargains by waiting. Japan's government hopes to reverse those expectations by flooding the market with yen, thereby boosting prices. Increasing the domestic money supply also has the effect of making the yen less valuable compared with other world currencies.
But the weak yen isn't universally applauded at home, with books titled "The Weak Yen Crisis" and "Will the Country Collapse from Bad Yen Weakening and Massive Inflation!?" at the top of Amazon.com lists.
Many economists caution that if the yen weakens too much, it could do more harm to Japan's struggling economy than good, by boosting too fast the cost of imports like fuel and grains. Even with the weak yen, ramped-up monetary easing and a big dose of public spending from the government, think tank Japan Center for Economic Research's revised economic outlook shows only a slight improvement in economic growth and price rises two years from now, with the consumer-price index logging only 0.6% average annual growth, a far cry from the Bank of Japan's target of 2%.
Japan's retailers are likely to resist raising prices as long as they can, for fear of killing off fragile demand, pinching profits and wages in the process.
Japanese udon noodle chain Hanamaru Inc. said it is struggling to keep the price of its cheapest bowl of noodles at 105 yen amid rising imported flour prices and has set up a cost-cutting committee to figure out how.
Credit-rating firm Moody's Investors Service issued a cautionary report last month, saying that though the weaker yen might help corporate profitability, the effects are likely to be short-lived. The Bank of Japan move and the yen's weakening "merely buys the government time to implement and gain traction from a credible structural economic reform," the credit firm said.
Dow Jones & Company, Inc.
Document DJTGMS1120130510e95a0008q