4Q 2011 - GDP Growth 4.7% annualised

The Cabinet Office announced Friday the growth rate of the country's gross domestic product on a real basis in the fourth quarter of fiscal 2011 was revised upward to 1.2 percent, or 4.7 percent on an annualized basis, from the previous quarter.

In an interim report in May, the seasonally adjusted figure, excluding price fluctuations, notched an increase of 1 percent, or 4.1 percent on an annualized basis, from the third quarter of fiscal 2011.

The upward revision was mainly because the rate of decline in capital investment was revised from minus 3.9 percent to minus 2.1 percent based on results of the Finance Ministry's Financial Statements Statistics of Corporations by Industry in the fourth quarter.

The revised data showed the nation's economic growth in the quarter was up partly on demand for reconstruction from the Great East Japan Earthquake.

The rate of increase in consumer spending, which accounts for about 60 percent of GDP, was also revised upward to 1.2 percent from 1.1 percent in the interim report.

The rate of increase in exports was revised upward to 3 percent from 2.9 percent in the interim report.

Reflecting price fluctuations, the growth of nominal GDP, which more closely reflects consumer sentiment, was revised upward to 1.2 percent, or an annualized 4.9 percent, from 1 percent, or an annualized 4.1 percent, in the interim report.

The real GDP in fiscal 2011 fell 0.004 percent from the previous fiscal year. Though the rate of increase was revised upward from minus 0.01 percent in the interim report, positive growth was not achieved.

The nominal GDP also shrank 2 percent, revised down from 1.9 percent in the interim report.


http://www.yomiuri.co.jp/dy/business/T120608004031.htm

Average Family Savings over Y16m

The average Japanese family has ¥16.64 million in savings, more than twice the average annual salary in the nation of 128 million.

2011 saw a 0.4 percent increase from a year earlier, with households of two or more people holding average debt of ¥4.62 million.

Japanese have long enjoyed a reputation as disciplined savers, as rates generally declined in the West in recent decades, including the United States, where economists and politicians have bemoaned low savings rates.

However, the data recently released by the internal affairs ministry also point to a widening savings rate gap, as the nation looks to kick-start its moribund economy and deal with a rapidly aging population, which has put increasing stress on public coffers.

Two-thirds of households saved less than the average ¥16.64 million, the data said, with median savings standing at ¥9.91 million.

Some 10.2 percent of the top-saving families had more than ¥40 million each, while the bottom 11.2 percent had a cushion of less than ¥1 million, the ministry said.

http://www.japantimes.co.jp/text/nn20120522f3.html

Japan Could be back to 1% inflation in 2 years

The Bank of Japan could reach its 1 percent inflation goal in two years as brighter growth prospects spur prices, the central bank’s top economist indicated.

“Growth in prices will be closer to the 1 percent inflation goal at or after the end of fiscal 2013 unless the economy gets thrown off course,” Eiji Maeda, 50, the BOJ’s chief economist, said in an interview in Tokyo yesterday, referring to the year ending March 2014. “In the long term, there are signs that the tide is turning in price trends.”

The remarks signaling that the target could be met in the year starting April 2014 are the strongest yet from the central bank, which last month forecast prices would increase 0.7 percent in fiscal 2013. BOJ Governor Masaaki Shirakawa has pledged “powerful” monetary easing until the goal is in sight and has already added stimulus twice this year.

Companies have improved Japan’s growth outlook by targeting an aging population, which could spur demand and help lift prices, Maeda said. Higher labor costs in countries like China, Japan’s largest trading partner, have reduced pressure on Japanese firms to lower prices, which has also helped ease deflation in Japan, he said.
Gap Erased

The gap between supply and demand as a ratio to gross domestic product, which currently stands between 2 percent and 3 percent, will probably be erased over the next two years, he said. Consumer prices tend to rise 0.3 percentage point for every 1 percentage point improvement in the gap, Maeda estimates.

“It’s a very bullish estimate,” Yoshiki Shinke, chief economist at the Dai-Ichi Life Research Institute in Tokyo, said of BOJ’s 0.7 percent price outlook for the next fiscal year. “Chances are high that the BOJ will be forced to conduct additional easing as actual price growth will be lower than its forecasts.”

The BOJ unveiled the 1 percent target in February. Core consumer prices, which exclude fresh food and are the central bank’s preferred measure, rose 0.2 percent in March. Prices will rise 0.13 percent in fiscal 2013, according to 40 economists surveyed by the government affiliated Japan Center of Economic Research last month. Shirakawa’s five-year term ends in April.

The central bank has come under pressure this year to bolster its asset-purchase fund, the main policy tool with its key rate near zero, to sustain the nation’s recovery from last year’s record earthquake and weaken a currency that surged to a postwar high in October.


http://www.bloomberg.com/news/2012-05-15/tide-turning-in-japan-deflation-fight-boj-s-top-economist-says.html

Deflation hasnt crushed Japan

  A NYT article that reported on the declining importance of manufacturing to Japan's economy at one point referred to: "the crushing deflation that has burdened Japan's domestic economy for nearly two decades." Actually, Japan has experienced modest inflation rather than deflation for most of the last two decades. Even when prices did fall, the rate of decline has been slow, exceeding 1.0 percent only in 2009, in the wake of the world financial crisis.

Japan, like other countries, suffers from having an inflation rate that is too low. This is a problem because nominal interest rates cannot fall below zero. It would be desirable to have a large negative real interest rate at present (the real interest rate is the interest rate minus the inflation rate), but this is not possible when inflation is a low positive number or a negative number.

  The fact that the inflation rate is below zero has no special importance in this story. The decline in the inflation rate from a positive 0.5 percent to a negative 0.5 percent is now worse than a decline in the inflation rate from a positive 1.5 percent to a negative 1.5 percent.

This fact can be seen clearly if we remember that the rate of inflation is an aggregate of tens of thousands of price changes across the economy. When the inflation rate is near zero many of these price changes will be negative, meaning that the prices of some goods are falling. (Computer prices have been falling rapidly in the United States for decades.) When the rate of inflation goes from a small positive number to a small negative number it simply means that the percentage of items with falling prices has risen. It is difficult to see how that could amount to some sort of calamity.

This point is important because the obsession with deflation has been a serious distraction in policy debates. Many have implied that the Fed and other central banks have been successful in their anti-recession policy because they have managed to avoid deflation. This is not true. They have in fact failed because they have not been able to lower the real interest rate as much as would be desirable given the weakness of the economy.

http://www.businessinsider.com/japan-has-not-suffered-from-crushing-deflation-2012-4

2011- 4th Year of Land Price Falls

For the fourth consecutive year, Japan's land prices have fallen. Prices decreased an average 2.6 percent in 2011, but the decline was smaller than the 3.0 percent in 2010 as the economy bounced back from the 3/11 disasters. Commercial land prices slipped 3.1 percent in 2011, less than the 3.8 percent drop in 2010, and residential land prices fell 2.3 percent, less than the 2.7 percent decline in 2010.

Fortunately, the triple disasters did not cause an overall steep drop in land prices nationwide. But attention must be paid to the fact that the disasters caused sharp declines in land prices in certain locations. Residential areas in Fukushima Prefecture, which was most affected by the nuclear crisis, saw land prices fall 6.2 percent in 2011 compared with 3.4 percent in 2010. There was a net population outflow of some 31,000 in 2011 — more than five times the corresponding figure in 2010.

While residential land prices in the Tokyo megalopolis declined 1.6 percent, those in the Osaka and Nagoya megalopolises fell 1.3 percent and 0.4 percent, respectively. In the Nagoya area and cities lying to the west of it, many areas saw rises in land price thanks to an influx of people from the Tohoku region. Iwate, Miyagi and Fukushima prefectures together saw a net population exodus of more than 40,000.

The Nagoya area saw land prices go up in 147 locations in 2011, double the 2010 figure and the Osaka area saw land prices rise at 165 locations, up from the 8 in 2010. In the Tokyo area, land prices rose at 91 locations, an increase of 13. Efforts are called for to prevent land speculation in areas that have experienced an influx of residents from Tohoku.

In municipalities devastated by the 3/11 disasters, there was polarization of land price movements. While land prices shot up at highland areas, land prices fell in areas destroyed by the tsunami or affected by liquefaction. Land prices soared by 60.7 percent in one highland area in Ishinomaki, Miyagi Prefecture. Many areas that had been submerged by the tsunami saw their land prices decline by more than 10 percent. In Urayasu, Chiba Prefecture, average land prices fell 7.5 percent due to liquefaction.

To stabilize land prices in disaster-hit areas, serious efforts must be made to utilize land in ways that will enhance its value, make affected areas more resistant to earthquakes and tsunamis, and establish better emergency evacuation routes and warning systems.

http://www.japantimes.co.jp/text/ed20120411a1.html

Winter bonuses down for 3rd straight year

 Winter bonuses paid between November 2011 and January 2012 fell for the third straight year, reflecting corporate earnings deterioration in the wake of the March 2011 disaster and a global economic slowdown due to the eurozone debt crisis, government data showed Tuesday.
The bonuses averaged 372,471 yen, down 1.9 percent from a year earlier, the Health, Labor and Welfare Ministry said. The data cover companies that have five employees or more.
In February, total monthly salaries per worker, which includes overtime pay and bonuses, rose 0.7 percent from the previous year to 265,497 yen on average, marking the first rise in nine months thanks to a leap day.

http://www.yomiuri.co.jp/dy/business/T120403004060.htm

'King of Tokyo' dethroned by insider trading probe

Edward Brogan was Japan’s highest-profile hedge fund manager until he suddenly dropped out of view this month.
Dubbed the “King of Tokyo” by traders, the 53-year-old American seemed to have it all: wealth, professional acclaim and status as a patron of contemporary art.
In his best year, Brogan had managed over one billion dollars in his flagship Whitney Japan Fund, although much of that has been withdrawn.
Now Brogan is at the center of a probe of insider trading. His Tokyo-based firm Japan Advisory has been closed since regulators imposed a fine and revoked its license at the end of June.
The order came after Japan’s securities watchdog determined Japan Advisory had shorted shares in Nippon Sheet Glass in August 2010 on the basis of leaked information that the glassmaker was planning an additional share offering that would have diluted its value per share.
It was one of five insider trading cases unearthed so far by authorities after a grinding two-year investigation into allegations of widespread insider trading ahead of public share offerings in Japan.
Brogan, who is said to be overseas, has not been charged with any wrongdoing, and none of the current raft of insider trading investigations in Japan has included any legal sanctions against individuals.
“He’s not in Japan, and I haven’t heard when he’s coming back,” Brogan’s Japanese-born wife, Junko, told Reuters. “I think he’s being made a scapegoat by the Japanese government.”
Japan’s Financial Services Agency (FSA) stepped up the pressure on Japan Advisory earlier this month by ordering a dozen investment banks to report on whether they had leaked inside information about planned share issues to the hedge fund manager in return for winning trading orders.
The July 3 directive was the first time Japan’s securities watchdog had singled out an investment firm like Japan Advisory for that kind of scrutiny.
Three days after the July 3 order, Brogan left Japan, two people with knowledge of his departure said.
A sign outside the Japan Advisory office says: “Temporary Closed.”  There was no immediate word on the fate of its affiliated funds.
By the end of June, assets in the flagship fund had dropped to $228 million, falling over time to about a sixth of the value in 2005, according to industry data.
But Whitney Japan has outperformed the market by a wide margin since 2000.
Brogan did not return calls or respond to a message sent by email. Temporary staff at Japan Advisory declined to comment.
How the Japan Advisory case plays out will be closely watched since Japan’s $17 billion hedge fund industry has operated in a kind of grey area of oversight for years.
The position of hedge funds has been a focus of the FSA since at least 2007 when then-financial services minister Yoshimi Watanabe said some of them were “piranhas” that needed to be expelled.
Tsutomu Okubo, the lead director of a ruling Democratic Party of Japan committee looking into insider trading told Reuters he was gathering trading data with the aim of publishing a watch list of suspicious hedge funds that should be investigated by regulators.
When it launched in 2000, Japan Advisory had been a subsidiary of the U.S private equity and hedge fund operator the Whitney Group.
But Brogan’s former partner, J.H. Whitney Investment Management, said it severed ties with Japan Advisory in December 2011 and transferred controlling interests in two affiliates to Brogan and others. It said in a statement the move was unrelated to the insider current investigation.
In interviews with Reuters, more than a dozen of Brogan’s associates described him as a driven investor who pushed hard to uncover profitable trading ideas and paid brokerages bonuses that could vary on the level of service he received.
In more than a decade of trading, Japan Advisory spun off tens of millions of dollars in commissions for brokerages including Goldman Sachs, JP Morgan, Citigroup and Nomura Holdings, associates says. Representatives of all of those financial institutions declined to comment.
Brogan and the firm gave “bonus” or “tactical points” to brokers that could mean additional commissions, three people with knowledge of the practice said. Like others interviewed they spoke on condition of anonymity because of the ongoing investigation.
The use of a points system by institutional investors to compensate brokers is not unusual in Japan, but Brogan’s model was heavily discretionary, creating a possible incentive for inside information to be leaked, officials have said.
In the Nippon Sheet Glass case, investigators found Japan Advisory had short-sold about $6.8 million in shares on Aug 20, 2010, four days before the company announced a share offering to raise capital that diluted the holdings of existing investors. A sell-off over those four days cut the glassmaker’s market value by 8%.
Regulators believe a former employee of Daiwa Securities Group was the source of that tip. Daiwa, which underwrote the offering, has apologized and launched its own investigation. The identity of the former employee has not been made public. One reason that regulators centered on the Daiwa connection was Brogan’s allocation of points to the brokerage, one person with knowledge of the matter said.
Japan Advisory was the second firm punished for insider trading in the Nippon Sheet Glass offering. In the other case, Japanese hedge fund Asuka Asset Management was fined and regulators believe JP Morgan, the other lead underwriter on the offering, was the source of that leak.
MAN ABOUT TOWN
Daiwa was not alone in courting Brogan. Brokers would host him at expensive nights out on the town, that would often start at upscale Italian restaurants and end at a strip club in the Kabukicho neighborhood of Shinjuku, four people who competed for Brogan’s attention and business said. The tab could run into the thousands of dollars, and it was understood Brogan’s hosts would pay.
“He wielded so much power and everyone kind of bowed down to him,” said one broker who worked with Brogan. “He was the ‘King of Tokyo.’ That’s what we called him.”’
For Brogan, the current investigation is the most serious setback in a three-decade career. He first came to Japan in the boom of the 1980s and by 1991, he was research director at Marusan Securities, a second-tier Japanese broker. He then made the leap to a series of Western banks, including a stint as auto analyst at Salomon Smith Barney. He was briefly at Tiger Management in Japan, an offshoot of the famous fund established by Julian Robertson.
In 2000, Brogan was hired by Whitney to help set up Japan Advisory.
By 2005—the fund’s best year—the Whitney Japan Fund was worth $1.3 billion. One million dollars invested in 2000 would have been worth $2.5 million by that year, according to industry data.
THE COLLECTOR
When he was riding high, Brogan cultivated an interest in modern Japanese art.
“I approached him to create an art fund because he was the biggest and most important on the street,” said Joni Waka, a Japanese curator who has anglicised his name to Johnnie Walker.
That idea fell through but Walker became a friend and a confidante of Brogan. He also helped build a large art collection for Brogan that remains in the offices of Japan Advisory. Works on display in the hallway alone could sell for over $100,000, experts said.
Brogan’s interest in art took him into a world far removed from funds and stock picks. Three months after Japan’s earthquake and nuclear crisis last year, Brogan was the only person with a finance background at a masquerade party with art writers, journalists and a self-described Japanese shaman.
In a video of the party, a shirtless waiter stood at attention, while each guest was asked to say how they would tackle Japan’s crisis. Brogan, wearing a Hawaiian shirt and a gold mask, singled out energy policy and said: “If I were prime minister, I would be focused on making Japan a green leader.”
Brogan continued to meet friends and brokers until weeks ago at a small bar just minutes from his home in the Hiroo district of Tokyo. He stored his favored Rebel Yell Kentucky bourbon there. An empty bottle sits on the shelf as a kind of tribute kept by the staff.
Walker, his confidante, said Brogan would be back. “Ed Brogan is taking a step back. He’s keeping his cool,” he said.


http://www.japantoday.com/category/crime/view/king-of-tokyo-dethroned-by-insider-trading-probe