Tuesday, September 22, 2015

Japan economic update - BBH

FXStreet (Guatemala) - Japan's markets are closed until Thursday. In some ways, Abenomics was a typical LDP program of fiscal and monetary expansion but on steroids.

S&P's recent downgrade of Japan to A+, matching the earlier move by Moody's, was coupled with an ominous warning Abe will likely fail to reverse the deterioration over the next 2-3 years.

Abenomics has succeeded in boosting the profitability of Corporate Japan.

August trade figures released last week showed that exports on a year-over-year basis were up 3.1%.

In fact, many expect that over the next couple of months Japan may announce additional fiscal support in the form of a supplemental budget.

If true, BOJ's Kuroda is not showing any sign that he is moving in this direction.

BOJ's ETF purchases and a weaker yen may have helped lift Japanese equities.

The foreign appetite for Japanese stocks have waned.

One issue that we suspect has not yet gotten the attention it deserve involves Japanese banks.

Reports suggest some of the banks' capital that had been previously invested in JGBs has been diverted to foreign corporate loans. The challenge is that the weaker economies, currency mismatches, and other considerations are souring loans, especially to emerging Asia.
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