airxliban
Posts: 4285
Joined: Wed Oct 01, 2003 12:14 pm

Anomaly In Japanese Financial Markets

Wed Dec 07, 2005 6:05 am

So the Japanese equity markets have been doing well, partly due to significant foreign investment, but yet the Yen is falling hard.

What's the explanation? Are US investors shorting Yen/USD futures for a few months from now?
PARIS, FRANCE...THE BEIRUT OF EUROPE.
 
eric
Posts: 324
Joined: Sun Dec 14, 2003 9:37 am

RE: Anomaly In Japanese Financial Markets

Wed Dec 07, 2005 8:16 am

Well, one of the greatest problems are that investments are low. With low household savings (unlike the Japanese bank) and a high rate of pensioners combined with a very high household debt and a stagnant economy this does not create the positive spin one wants on a economy.

Although the outlooks are positive...


eric
n
 
airxliban
Posts: 4285
Joined: Wed Oct 01, 2003 12:14 pm

RE: Anomaly In Japanese Financial Markets

Wed Dec 07, 2005 10:07 am

Not sure what you mean. 2004 growth of the Japanese economy was 2.9%, which is not bad for a highly industrialised country that is the world's second largest economy.

If you have a look at the TSE:



But when looking at what is going on with the Yen vs Dollar exchange rate:



It appears to be an anomaly.
PARIS, FRANCE...THE BEIRUT OF EUROPE.
 
eric
Posts: 324
Joined: Sun Dec 14, 2003 9:37 am

RE: Anomaly In Japanese Financial Markets

Wed Dec 07, 2005 8:14 pm

I know and this anomaly is founded on low consumer spending and high household debt.

An economy cannot be upheld on the basis of high FDI. Although it is good for growth, it is no real indicator of the economy itself. The Japanese National Bank still holds large amounts of US Dollars, i.e. an indication that they are not likely to default any time soon. This means that Japanese firms have the chances of growth (which is happening) but it is unlikely to be a lasting event unless either a) household starts spending money and/or lower their household debt burden or b) Japanese government allows for higher foreign ownership.

Furthermore, the issues of a rising average age is not to be overlooked. The stress it imposes on the labour force and state pension schemes does take its toll.

And they have few natural resources which are unable to support the nation so they rely heavily on imports.
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