Published on June 7, 2016
1. Government Policies –Japan – May 2016 By: Paul Young, CPA, CGA
2. • This presentation is on perspective when it comes to Japan
3. Paul Young - Presenter Bio • CPA/CGA • 25 years of experience in Academia, Industry and Financial solutions • Youtube Channel - https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg
4. Agenda - Government - GDP - Economy - Banking Sector - Government Policies - Trade – Canada and Mexico
5. Japan - Government • The latest Yomiuri Shimbun survey found the approval rating for Prime Minister Shinzo Abe's Cabinet rose to 53 percent from 50 percent in the previous survey conducted in April. • Conducted Friday through Sunday, the new survey saw the disapproval rating for the Abe Cabinet decrease to 34 percent from 38 percent in the previous survey, which was held April 1-3. • Fifty-six percent had a positive opinion of the government's response to the Kumamoto Earthquake, much more than the 30 percent who replied negatively. • A total of 93 percent favorably evaluated U.S. President Barack Obama's decision to visit the atomic bomb-hit city of Hiroshima. The increase in the Cabinet's approval rating is believed to reflect public satisfaction with the response to the disaster and the diplomatic achievement of realizing Obama's visit. • Meanwhile, 43 percent had a positive opinion of the Abe Cabinet's economic policies, while another 43 percent had a negative opinion. In the previous survey, 39 percent responded positively and 49 percent negatively. • Regarding the planned hike in the consumption tax rate from the current 8 percent to 10 percent in April 2017, a total of 69 percent said the increase should be postponed. That was up from 65 percent who supported a postponement in the previous survey.
6. Japan - GDP Japan's debt is already at about 245% of its annual gross domestic product -- or more than 1 quadrillion yen ($11 trillion). "Japan's public debt is unsustainable under current policies," the IMF said in a report issued Thursday. "A credible medium-term fiscal consolidation plan is needed ... [it] should aim to put debt on a downward path." The IMF has repeatedly urged Japan to control its gigantic debt. The country is still recovering from a decades-long deflationary period, during which Tokyo borrowed ambitiously to fund programs aimed at boosting growth. Going forward, the IMF says the world's third-largest economy needs to strike a balance between growth and debt reduction. For example, the second phase of a consumption tax hike is slated to go into effect in April 2017. That means more money in government coffers, but at the risk of slower growth. The IMF has recommended Japan start working now to find ways to offset that drag on the economy.
8. Japan Economy – 2016 Outlook • Japan’s decision to delay the next consumption tax increase from 2017 to 2019 has prompted us to boost the outlook for consumer spending and overall growth next year to an average of 0.8% from our prior forecast of only 0.2%, as well as lowering our inflation forecast by roughly half to an average of 0.7% • Abe has cited the G-7’s backing for using all policy tools the countries can as a justification for pushing back the sales tax hike, reportedly until October 2019 from April 2017. • “The government probably wants to avoid delivering a hammer blow to a fragile economy without seeing solid improvement at the fundamental level,” Margaret Yang of CMC Markets said in a commentary. • The last time Japan raised its sales tax, to 8 percent from 5 percent in April 2014, the economy fell back into recession. Growth has faltered since then, and Abe opted to postpone a tax hike, to 10 percent, set for October 2015 to April 2017.
9. Government Policies • FDI • According to the 2015 UNCTAD report on world investment, Japan was the 13th most attractive destination for multinational companies in the 2015-2017 period. Its potential appeal is very strong compared to other countries, but its performance in terms of reception of FDI is weak. After slowing down in 2009 following the global economic crisis, Japan experienced two consecutive years of disinvestment before FDI influx returned to positive values. In 2014, the influx reached USD 10 billion • Inflation • Consumer prices are at 3.4% • Tax Policies • Corporate Tax 32.11% • Consumption tax 8%
10. Banking Sector Japanese banks are currently suffering from flat margins in the wake of economy slowdown. The Bank of Japan has even reduced its interest rates into negative territory while Japanese currency Yen fell 4.2 percent. Markets and investors are looking to the Bank of Japan's decision. Majority of economists predict it may leave the deposit rate on excess reserves at negative -0.1 percent, according to Financial Times. Horseman Capital's Japan-focused fund has about $24 million assets under management right now. It started trading back in December 2015. The fund recorded a growth of 11.57 percent in February 2016 and was last up 17.06 percent year-to-date. The fund has been on short Japanese equities, with the largest short being Japanese regional banks.
11. Canada and Japan Trade
12. Sources • Contact: [email protected] • Other links • Socialism - https://www.youtube.com/watch?v=fhk2b97BYKU