TV

Kay Van-Petersen
A fast and furious fortnight ahead for traders and investors with the Federal Reserve committee meeting on Wednesday the 29th of April plus the reserve banks of Australia and New Zealand due to give rate decisions. Asia based strategist Kay Van Petersen gives us his analysis of the data landscape as the next two weeks pan out to offer extra volatility and possible opportunities.
Article / 20 November 2012 at 11:36 GMT

Asian Focus: New Japanese leader perhaps but same dismal backdrop

Market Analyst
Singapore

In this TradingFloor.com video Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, looks at the likely outcome of the recently called Japanese election and what it will mean for macro and monetary policy in Japan.

Rising opposition
The leading opposition party the Liberal Democratic Party (LDP) has 25 percent of the vote compared with the ruling Democratic Party of Japan (DPJ) which has 15 percent, according to recent opinion polls. This concerning as LDP is in favour of more aggressive monetary easing by the Bank of Japan which so far has not worked in boosting Japan’s economy.

“The problem is that simply turning on the money taps is no guarantee that you will see a turnaround in the economy,” says Andrew. “But we have a long way to go and it’s not an aggressive lead (by the LDP) and it could be quite easily eroded.”

Anti-China sentiment growing
Of particular interest is the emergence of two smaller opposition parties which are growing in popularity. Both of these parties are quite anti-China which is increasingly popular right now due to a dispute over some Japanese/Chinese islands. The dispute is so far more serious for Japan as it is negatively affecting Japanese exports to China.

“Chinese people are simply boycotting Japanese goods and that’s having quite a serious impact on the actual Japanese economy as a whole,” says Andrew. “Regardless of whoever does gain the vote it will be quite a difficult task to manage or even diffuse the sentiment that is growing within Japan to actually take this confrontation just a little bit further.”

Breath of fresh air in leadership change though not much else
Japan is up to its sixth prime minister in as many years, so a seventh is hardly likely to change that much for the economy which is struggling with low growth and deflation.

“We have seen the various parties trying to turn on the taps for the last 15 years and it is simply having no impact,” says Andrew. It will be a difficult task and there are no guarantees but maybe a different breath of fresh air might be something useful.”

Bank of Japan
As expected the BOJ’s November meeting resulted in no additional monetary easing. There is now an increasing expectation that it will act at its December meeting just four days after the election.

“It is a short enough period to prevent the newly elected politicians from being too vociferous in their policies after winning the election so that might be a good time for the BoJ to do some more stimulus,” says Andrew, adding that by that time we will have seen the final numbers for the third quarter.

Trade balance deteriorating
Japan’s October trade balance figures to be released later this week are expected to show a significant decline in exports – seen falling to 4.9 percent year-on-year versus 10.3 percent in the previous year.  Imports are also seen declining - down about 3 percent in October versus a minor positive in September.

“A general deterioration in the trade balance is expected and I can’t see anything that can really turn that around,” says Andrew.

Market impact
Although the outlook for the trade situation for Japan is clearly dismal the latest report however will have little to no impact on the yen. It is currently more affected by comments made by LDP leader Shinzo Abe ahead of the election.

“We are seeing a lot of yen weakness on the back of Abe’s stance on his monetary policy,” says Andrew. He has touted a two percent inflation target for the BoJ rather than a one percent target which is in place at the moment and he is also considering opening up a sovereign wealth fund to invest in overseas bonds which would actually require a constitutional change to allow the BoJ to do so.

“He is generally very open to easing and that is having a negative impact on the yen and I think these are the issues driving the yen at the moment rather than the trade numbers for October,” says Andrew.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Show latest activity
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail