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29 Oct 2014
Japan's economic data visibly improving - BTMU
FXStreet (Łódź) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ observes that recent economic data coming from Japan has been encouraging, and suggests that there has been a pickup in GPIF capital diversification.
Key Quotes
"As PM Abe deliberates on whether to implement the second sales tax increase in October 2015, the data flow is certainly improving from Japan. Industrial production jumped 2.7% in September after a fall of 1.9% in August."
"However, that wasn’t enough to avoid a 1.9% contraction in Q3 after a 3.8% contraction in Q2. PM Abe will at least be reassured that the economy looks to be improving although the Q3 GDP rebound may still disappoint and place political pressure on Abe for a delay."
"There is an interesting Reuters story this morning quoting a 'person with direct knowledge' of GPIF allocations who stated that domestic bond holdings have fallen below 50% of the GPIF total as of the end of Q3. If true, this would imply an acceleration in shifting out of domestic bonds. The GPIF domestic bond holding fell from 55.4% in Q1 to 53.4% in Q2."
"By our calculations, a drop to just below 50% would amount to about a JPY 4.5-5.0trn shift in capital to other assets. We did see a notable pick-up in foreign equity buying in Q3 but we can’t confirm the source of that outflow. Certainly though, if this Reuters story is true, it appears the much anticipated diversification of GPIF capital with a target of getting JGB holdings to 40% of assets looks to be well under way already."
Key Quotes
"As PM Abe deliberates on whether to implement the second sales tax increase in October 2015, the data flow is certainly improving from Japan. Industrial production jumped 2.7% in September after a fall of 1.9% in August."
"However, that wasn’t enough to avoid a 1.9% contraction in Q3 after a 3.8% contraction in Q2. PM Abe will at least be reassured that the economy looks to be improving although the Q3 GDP rebound may still disappoint and place political pressure on Abe for a delay."
"There is an interesting Reuters story this morning quoting a 'person with direct knowledge' of GPIF allocations who stated that domestic bond holdings have fallen below 50% of the GPIF total as of the end of Q3. If true, this would imply an acceleration in shifting out of domestic bonds. The GPIF domestic bond holding fell from 55.4% in Q1 to 53.4% in Q2."
"By our calculations, a drop to just below 50% would amount to about a JPY 4.5-5.0trn shift in capital to other assets. We did see a notable pick-up in foreign equity buying in Q3 but we can’t confirm the source of that outflow. Certainly though, if this Reuters story is true, it appears the much anticipated diversification of GPIF capital with a target of getting JGB holdings to 40% of assets looks to be well under way already."