ThxPORTAL - My OnlinE InvestmenT ProgresS

Japanese stocks will be the best investment among the world's biggest markets during 2010, says Byron Wien, vice chairman of Blackstone Advisory Services and former chief market strategist for the Pequot Capital Management hedge fund.

Stock prices are low and the economy is improving in Japan, which is good news for companies there, Wien tells Bloomberg.

“I would definitely start buying now,” Wien says.

“Everybody who could sell Japan has sold Japan. Everybody is on one side of the boat. My view is that we have a pretty good chance of having this one be the best of the major industrialized markets. It’s not a boom, but things are getting better.”

The yen, meanwhile, has weakened from record highs, which makes Japanese exports more competitive.

The Japanese government recently issued a report saying that it had not changed its assessment of the economy although Tokyo did remove foreign exchange and stock-price volatility from a list of risks it is watching.

“Recent yen and stock price movements have been fairly calm, so we concluded that they are not likely to pose a significant downside risk to the economy for the time being,” says Cabinet Office Parliamentary Secretary Keisuke Tsumura, according to Dow Jones newswires.

The yen strengthened to 84.82 against the dollar in November but is now trading at around 91.00.

Stock prices have been rising, and morality appears to be doing likewise.

“The rises in share prices that started at the end of last year improved worker sentiment,” says Finance Minister Naoto Kan, according to Dow Jones newswires.

source HERE

Jan. 10 (Bloomberg) -- Japan Airlines Corp.’s largest banks are set to agree to a bankruptcy of Asia’s largest carrier, said four people familiar with the matter.

Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. are prepared to go along with a proposed court-led reconstruction, said three people who declined to be identified because the matter is private. The state-owned Development Bank of Japan already agreed to the bankruptcy, according to the other person.

Japan Air is seeking new investors and loan write-offs as it restructures after posting three losses in four years. The government will hold talks on JAL’s future as soon as Jan. 12, Transport Minister Seiji Maehara told reporters two days ago in Tokyo after meeting with Prime Minister Yukio Hatoyama.

“JAL can be reborn as an attractive company should it undergo decisive restructuring,” said Ryota Himeno, an analyst at Mitsubishi UFJ Securities Co. “It’s a positive for JAL if the reports on bankruptcy are true.”

Mizuho spokeswoman Masako Shiono, Mitsubishi UFJ spokesman Takashi Takeuchi and JAL spokeswoman Sze Hunn Yap declined to comment. Sumitomo Mitsui spokeswoman Chika Togawa wasn’t immediately available for comment and calls to the media relations office of the Ministry of Finance, which oversees Development Bank, went unanswered outside regular office hours.

JAL’s Debt

JAL owed 429 billion yen ($4.6 billion) to its four largest creditors at the end of March, according to the company.

The Tokyo-based carrier will file for bankruptcy in the week starting Jan. 18, and the Enterprise Turnaround Initiative Corp. will agree to provide financial aid to Japan Air the same day, said a person familiar with the negotiations, who declined to be named.

The state-run fund may have JAL partner a U.S. airline on flights without any capital ties, the Nikkei newspaper reported today. Candidates for such an alliance include Delta Air Lines Inc. and AMR Corp.’s American Airlines, the report said.

Nikkei yesterday reported the banks would accept the government’s plan for a court-led bankruptcy.

JAL’s market capitalization tumbled below $2 billion last week, compared with more than $6 billion a year earlier. Its shares ended at 67 yen, matching the lowest close since the company listed in 2002.

The airline is suffering from tumbling international traffic and is trying to slash pension costs. JAL has asked its 9,000 retirees to accept cuts in their payouts of about 30 percent and set Jan. 12 as a deadline for responses.

source HERE

Japan was unsuccessful in containing deflation for much of the 1990s. Interest rates were maintained near-zero for almost 15 years, with July 2006 marking the first time this policy was abandoned. Only in 2008 did Japan again sustain positive inflation rates.

One of the systemic side-effects of this long period of low interest rates is the so-called carry trade, with investors taking loans at very low interest rates in Japan and investing in higher yielding assets in countries with higher interest rates, typically emerging market economies. The 2008 financial market crisis has resulted in the unravelling of this carry trade, with many of these borrowed and sold yen unravelling causing a huge spike in the value of the yen relative to other currencies.

Systemic reasons for deflation in Japan

• Fallen asset prices. There was a rather large price bubble in both equities and real estate in Japan in the 1980s (peaking in late 1989). When assets decrease in value, the money supply shrinks, which is deflationary.

• Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in a bank account. This likewise means the money is not available for lending and therefore economic growth. This means that the savings rate depresses consumption, but does not appear in the economy in an efficient form to spur new investment. People also save by owning real estate, further slowing growth, since it inflates land prices.

• Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods, raw materials (due to lower wages and fast growth in those countries). Thus, prices of imported products are decreasing. Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary.

Investing in a deflationary economy

A period of deflation results in an increase in the burden of debt. Stores of value such as gold or cash are thus best kept out of the markets as their relative value appreciates even without interest income. This is generally a bad thing for the rest of the economy, so it is important to watch for signs that economic and fiscal policy are working to correct this potential downward deflationary spiral

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