JAPAN: ABE'S SUPER MAJORITY, RECORD EARNINGS & RELENTLESS BOJ BUYING

THE MATASII TAKEAWAY

  • Further stimulus for Japan,
  • Governor Kuroda is now more likely to serve another term at the BoJ (and therefore),
  • A weaker JPY.
  • With an aging population and trillions of dollars worth of pension promises about to come due, Japan's central planners have no option but to double down on efforts to convince millennial investors to once again throw all of their money into the Nikkei slot machine.  “We have to increase our assets. Otherwise we cannot survive in a super-aged society,”

 

A convincing election victory for Japanese Prime Minister Shinzo Abe’s ruling coalition, which gave it another constitution-changing supermajority, pushed the Nikkei to the highest level since 1996, after a record 15 consecutive days of gains - the longest winning streak on record - and sent world stocks to new all-time highs.

Japan’s Abe was re-elected and his coalition reinvigorated by an increased share of the vote. Common "hot takes" are that this means:

  • Further stimulus for Japan,
  • Governor Kuroda is now more likely to serve another term at the BoJ and therefore
  • A weaker JPY.
  • Japan's central planners now  have no option but to double down on efforts to convince millennial investors to once again throw all of their money into the Nikkei slot machine.

On the flip side, just as many argue that this is simply an extension of the status quo – USDJPY is little changed.

That said, it appears that the BOJ's relentless buying of anything that isn't nailed down has started to trickle down: corporate Japan is having its best year for earnings since 2000, with the country getting the most EPS upgrades since 2010.

 

JapanAs the Wall Street Journal points out, with an aging population and trillions of dollars worth of pension promises about to come due, Japan's central planners have no option but to double down on efforts to convince millennial investors to once again throw all of their money into the Nikkei slot machine.  Efforts to get millennials in Japan to invest are nothing new and the latest such efforts even include tax exempt brokerage accounts for people willing to gamble just $3,500 per year.

If anything can persuade Japanese to invest, it may be fear rather than greed. The government’s debt, more than twice the nation’s annual output, has fanned doubts about whether promised pensions will be forthcoming decades from now.

More than half of Japan’s household wealth sits in bank deposits or cash under the mattress, according to the Bank of Japan, compared with 14% in the U.S.

“We have to increase our assets. Otherwise we cannot survive in a super-aged society,” said Satoshi Nojiri, director of the Fidelity Retirement Institute in Japan.