Tag Archives: japanese
Market Turmoil Forces G8 Leaders To Focus On Global Economy
http://www.ft.com/cms/s/0/97cbce80-d4ee-11e2-9302-00144feab7de.html#ixzz2X2HHQztS By Chris Giles in London, Robin Harding in Washington and Ben McLannahan in Tokyo Turmoil in financial markets is once again overshadowing a Group of Eight summit, turning world leaders’ attention away from trade, tax and transparency and back to the bumps on the road to recovery. With global bond markets swooning on the hint that the US might slow its money-printing operations and currency market volatility leaping as investors try to gauge the right level of the dollar and the yen, G8 leaders know the world economy remains a dangerous place. None of this was in Britain’s scripts for the summit. Only a month earlier, when the finance ministers and central bank governors of the Group of Seven met just outside London, George Osborne welcomed the breathing space financial markets were offering. “We are meeting at a time when financial market sentiment has improved and there are signs this is feeding through to an improved outlook in some of our economies,” the British chancellor said after the G7 meeting. Britain’s expectation of a relaxed chat about Abenomics, the name given to Japanese prime minister Shinzo Abe’s three-pronged approach to reviving his country’s economy, alongside the perennial pressure on Germany to boost its domestic demand will now have a sharper edge. But the actor who has done most to influence the global economy in the past few weeks, Ben Bernanke, chairman of the US Federal Reserve, will not even be at the G8 and will not speak until the day after it finishes. The Fed winds up its two-day meeting on Wednesday. Mr Bernanke will be at the centre of G8 discussions because it was his comment last month that the Fed might start to slow its third round of quantitative easing at one of its next few meetings that sent markets down. Next week is unlikely to be that meeting, given some continued weakness in the data, and uncertainty about the effects of tighter US fiscal policy. But bond investors have taken the words as a sign that the peak of bond prices had passed and the smart money should exit. Instead, Mr Bernanke is likely to sharpen the signal about when the Fed will taper QE3, while repeating as loudly as he can that it all depends on the economic data and there is a big difference between easing at a slower pace and actually tightening monetary policy. The simple reality for most Fed officials is that the economic outlook looks better now that it did when the Fed began QE3 last September. The unemployment rate has come down from 8.1 per cent to 7.6 per cent. Given that, it cannot make sense to keep easing monetary policy at the same pace forever, and Mr Bernanke’s “next few meetings” remark reflected that. To the extent that recent turmoil knocks a bit of froth out of global markets, the Fed will regard it as no bad thing. If G8 leaders are missing one key figure in the global economy, the other is in the room, Mr Abe, whose “Abenomics” has pushed a rapid recovery in the world’s third-largest economy, but with continued long-term fears for its sustainability. Mr Abe will come to Lough Erne with a simple argument. The 15 years of deflation Japan has experienced, more or less without interruption, were extraordinary, so they demanded an extraordinary policy response. G8 summit Read our coverage of the gathering as leaders debate tax, trade, the global economy and foreign policy So far, trading partners have fixated on the yen, still the world’s worst-performing currency over the past six months even after its rapid rise over the past week. But a lower yen is a side-effect of a concerted effort to rouse the world’s third-largest economy from slumber, the prime minister will say. What is good for Japan is good, for everybody else. Unofficially, the Japanese argument is even simpler, however. The yen acted as the world’s shock absorber for the four years after the Lehman crisis, Japan thinks. Even now, amid a fresh round of fears over global growth, it is still about 5 per cent stronger than its 10-year average against the US dollar. So, leaving aside all the talk of trade wars and stealing growth from neighbours, isn’t it time Japan caught a break? Germany and the US are wary about this conclusion and will be relieved by the yen’s recent bounce back as they tolerated but did not welcome the yen’s depreciation since the start of Abenomics. But the key question for Japan is whether the boost to growth is anything more than temporary. Here, Mr Abe will try to spell out the guiding principles behind the “third arrow” of structural reforms, that was approved by the cabinet on Friday. Arrows one and two – fiscal and monetary stimulus – were easy to implement and quick to take effect. The third will not be. Continue reading
Look Beyond Short-Term Turbulence In Emerging Markets
http://www.ft.com/cms/s/0/efa289c2-d995-11e2-98fa-00144feab7de.html#ixzz2X2DFzLUx By Mark Mobius The long-term emerging markets picture is bright, says Mark Mobius Emerging stock markets ended May in decline, with concerns that the US Federal Reserve could taper quantitative easing (QE) measures earlier than expected accompanied by a sharp correction in Japanese bonds and profit-taking in Japanese equities. June has been even worse – QE worries are still with us, there have been riots in Brazil and Turkey and softer economic data out of China. Not surprisingly, this has hit emerging market bonds, stocks and currencies hard. This week, the Indian rupee hit an all-time low against the dollar. It is not a pretty picture. But the longer-term case for emerging markets is much more persuasive. Looking back, for example, in 10 of the past 12 calendar years, emerging markets have outperformed developed markets. One major reason I remain positive on emerging markets is growth. Although short-term global GDP forecasts have tended to drift lower as quarterly releases have missed expectations in a number of markets, I think 2012 will mark the low point in overall growth, with acceleration anticipated in 2013 and in subsequent years. I expect emerging market growth in 2013 and beyond to continue to be much stronger than growth in developed markets. As well as feeding into corporate profitability and valuations over time, this economic growth is likely to drive rising demand for commodities. Augmenting overall growth patterns, industrialisation and urbanisation in emerging markets are likely to increase commodity demand further, which over the longer term will drive commodity prices ahead. While commodities, exports and infrastructure development continue to be leading growth drivers in many emerging market economies, overall growth is likely to come increasingly from domestic sources. Expanding consumer wealth is creating an increasingly large and discriminating body of middle class consumers across emerging markets, and their demand – for cars, electronics and other consumer goods and services – is in turn creating increasingly significant domestic economic activity. Consumer indebtedness in emerging markets is far lower than in developed markets, so emerging market consumers have commensurately greater capacity to gear up their demand. In addition, demographic factors are far more favourable in many emerging markets than in many developed markets. With a relatively high proportion of the population in emerging markets moving into the workforce and a relatively low proportion of dependants, demographics are helping to reinforce consumer demand. Even in markets such as China, where demographics are less clearly favourable, productivity gains from moves out of agriculture and into manufacturing and service industries still provide a positive influence on growth and domestic demand. As emerging markets become more mature and investors in the asset class more varied and sophisticated, niche product offerings are becoming increasingly significant. For example, smaller companies represent a distinct opportunity within the emerging markets universe, providing exposure to businesses at an early and fast-growing stage of their life cycle. Private equity and private investment in public equity vehicles also help address these young, dynamic businesses. Within emerging markets. “frontier markets” enjoy strong growth arising from their low starting base, abundant natural and human resources and the availability of easy gains from market reforms and injections of technology into relatively low-wage economies. They are relatively under-researched, so undervaluation and pricing anomalies abound. Nowhere is this more the case than Africa, which I feel represents an investment destination on its own account. There are those who say the link between GDP growth and market returns is tenuous. Maybe. But investors don’t buy markets, they buy companies. For all the attractive trends outlined above, investors should always be looking for those stocks that are most underpriced relative to their long-term potential. In frontier markets, that potential is largely about capital growth. But increasing numbers of emerging market companies now trade on attractive dividend yields, and income is becoming a bigger component of total returns. Mark Mobius is executive chairman of the Templeton Emerging Markets Group Continue reading
Missouri Moves To Lift Ban On Foreign Farm Owners
Alan Scher Zagier, AP 4:47 p.m. EDT June 18, 2013 (Photo: Amanda Lucier, AP) JEFFERSON CITY, Mo. (AP) — Weeks before a Chinese conglomerate agreed to buy Smithfield Foods in the largest such takeover of a U.S. business, Missouri lawmakers quietly approved legislation removing a ban on foreign ownership of agricultural land. Missouri is one of several Midwest states with little-known laws passed in the 1970s amid concerns over Japanese investment that prohibit or restrict foreign farmland ownership. The company has operations in 26 U.S. states, including several in the Midwest. Smithfield has said it doesn’t believe these issues will be an obstacle to the takeover deal being approved. Meanwhile, Smithfield announced Tuesday it is laying off 120 more workers as part of its previously announced closure of a Virginia facility that makes hot dogs and deli meat. The Smithfield, Va.-based pork producer plans to close its Portsmouth, Va., plant in the middle of August, said Jeff Gough, Smithfield’s senior vice president for human resources. A northern Missouri legislator whose amendments to a pair of larger bills helped push the plan through the state legislature and onto the desk of Gov. Jay Nixon said he wants to provide greater oversight of foreign ownership, which will be capped in Missouri at 1% and require state approval. The changes were approved on the final day of the legislative session. “The law doesn’t work,” said Rep. Casey Guernsey, R-Bethany, citing legal loopholes that allow foreign owners to mask their assets behind domestic-based groups. “What I want to do is make it work … It will provide a degree of accountability for an international corporation that it wouldn’t have before.” Shuanghui International Holdings announced its plans to purchase Smithfield Foods on May 29 in a deal that still requires shareholder approval and a federal regulatory review by the U.S. Committee on Foreign Investment. The deal’s expected value is $7.1 billion, including debt. In Oklahoma, the law limiting foreign farmland ownership exempts swine operations, said Diane Clay, an Attorney General’s Office spokeswoman. And in Iowa, the office of Attorney General Tom Miller said it expects Smithfield Foods’ new owner to “comply with all (laws and) agreements,” including a consent decree related to livestock production by meatpackers. “We hope to close the loop soon, whether it’s a final letter from Smithfield to us or a memo of understanding from our office to Smithfield,” said Geoff Greenwood, a Mille spokesman. The Missouri bill awaits Nixon’s approval, and his office declined to say whether he would sign it. The offices of Attorney General Chris Koster and the state Department of Agriculture also declined to comment. A Columbia-based group that opposes the corporate consolidation of the agriculture industry criticized Guernsey’s handling of the legislation. Language removing the foreign ban was added to two Senate bills in late April while in the House Agribusiness Committee, which is chaired by Guernsey. The underlying bills to which the amendments were added deal with farm loans and University of Missouri Extension districts. In early May, Guernsey added an amendment while the bill was on the House floor that doubled the allowable foreign farmland ownership from half a percent to 1%. “To call it a coincidence is doing a disservice to the democratic process,” said Tim Gibbons of the Missouri Rural Crisis Center, referring to the legislative votes that preceded the Smithfield sale announcement and the absence of broader debate. “These things should have been discussed. And they weren’t.” Guernsey, a dairy and beef cattle farmer, countered that he introduced a similar bill in May 2012. He bristled at suggestions that the foreign ownership ban was lifted at the request of Smithfield, which he said is the largest employer in his five-county district and a campaign contributor of Guernsey’s. “I didn’t even know about Smithfield until we were out of session,” he said. “Trust me, the last person Smithfield tells about any of their business decisions is Casey Guernsey.” While Guernsey said he “can’t stand the thought of the Chinese owning our largest employer,” he’s eager to see the potential economic benefits of a deal that some observers believe was driven by greater demand among Chinese consumers for U.S.-produced food. U.S. Sen. Roy Blunt shared a similar sentiment. “That’s a great opportunity for U.S. agriculture and a great opportunity for American agriculture,” he said. “Once people get better food they universally do not want to go back to the bad food again. Not only is there going to be more people but there’s going to be more demand and more competition for the food that’s out there. ” Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed Continue reading
