Japanese bond market, Japanese stock market, Market outlook

Explaining Japan’s deflation 2016: the cause is not just the consumption tax hike

Did Abenomics successfully save Japan from deflation? Not really. Will quantitative easing and negative interest rates by the Bank of Japan (BoJ) make it better in the future? Not very likely.

The BoJ is no longer controlling the monetary policy of the Japanese economy. The central bank has already taken all the effective options, and thus the room for expansion of easing is quite limited. There is something that decides the monetary policy instead of the central bank.

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Currencies, USD/JPY

USD/JPY forecast in 2016: the BoJ’s expansion and the Fed’s rate hikes will both decelerate

The dollar will fall, and the yen will strengthen in 2016. The Fed could not continue to raise rates, and the strong yen will be back again as the Bank of Japan’s monetary expansion is now limited.

There might be a number of investors who still bet on the yen’s fall due to Abenomics, but we recommend to reconsider. We even recommend to buy the currencies under quantitative easing, such as the yen or the euro.  Here are the reasons.

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Commodity markets, crude oil

WTI crude oil price forecast 2016: shale oil industries’ bankruptcies and OPEC’s production cuts

As we have been analyzing the crude oil market from several aspects, we would like to summarize our predictions in this article.

The oil price has been tumbling since 2014 due to the oversupply by the US shale oil industry. The following is the chart of WTI crude oil futures:

2016-3-22-WTI-crude-oil-middle-term-chart

The shale industry has made it possible to extract oils that could not be extracted in a conventional way, and consequently the supply of oils immensely increased. Now even oil tankers are used as storage.

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Accounting and laws

Tax haven countries for global businesses: hedge funds and tech giants

Tax havens are countries with zero or very low tax rates, and they are known for being used by global companies and hedge funds. There are various kinds of tax haven countries in the world, and thus we are going to discuss their differences and characteristics in this article.

The writer does not have any qualification for laws or accounting in any country, so please read and understand disclaimers to read this article.

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Japanese bond market, Market outlook

Japan’s finmin Aso supports the debt monetization by the Bank of Japan

This is somewhat old information but surely illustrates what Japan thinks of quantitative easing. The following is a video of the Japanese financial minister Taro Aso in 2010 explaining why Japan’s huge public debt is not a problem:

In this video, Mr Aso asserts that Japan will not go bankrupt despite the huge public debt because debt monetization will clear all of it. This was when the Liberal Democratic Party was not ruling the parliament, and thus he was perhaps more frank to talk about what he actually thinks of the debt.

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Market outlook, US stock market

Hedge fund managers on secular stagnation: George Soros, Ray Dalio and Bill Gross

The global deflation and low economic growth are the keys to investment in 2016. The weak demand from the decelerating Chinese economy has pushed down the commodity prices, and Europe and Japan are still struggling to recover from the recession.

Even the US economy has a symptom of a slowdown now, indicating it cannot support the rest of the world economy alone.

The advanced economies have already relied on the quantitative easing, and if even the QE cannot revive the economies, what would be the cause of such a strong deflationary force? Larry Summers, the former Treasury Secretary, called it secular stagnation.

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Commodity markets, Gold

Gold price will go up to $2,000: the Fed’s rate hikes, the currency war and the secular stagnation

The currency war, the market turmoil and the secular stagnation will make the gold price skyrocket to $2,000 in 2017 or 2018.

In Jan, 2016, we predicted the turnaround of the gold price, and since then gold has indeed rebounded from its three-year bear market as you see in the following chart of the gold price:

2016-3-3-gold-chart

The timing of our prediction was perfect. Investors finally realized three or four rate hikes in 2016 are practically impossible, and the secular stagnation will keep the US and global economy in need of financial easing. In addition to it, there are several facts for which we can be bullish about gold.

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Commodity markets, crude oil

Shale oil companies’ earnings releases predict the crude oil price in 2016

After the radical crash in 2015, the WTI crude oil price has been trading around $30s, and many try to forecast how long it will remain low.

The prospect of the crude oil price depends on the two factors: the OPEC and the US shale oil industry. Whilst the OPEC now tries to cooperate to freeze production, Saudi Arabia is still unwilling to cut its output.

Then what about the US shale industry, which Saudi Arabia tries very hard to kill? They surely have larger costs for production, and then it would be them that would die out if low oil prices continue.

The shale oil companies published their earnings releases in February, and this article is examining the results. Are they cutting production? Are they close to bankruptcy? These factors will be necessary to know in order to foresee the future of oil prices.

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Japanese stock market, Market outlook, News

2015 4Q Japan’s real GDP growth: consumption dies due to tax hike, exports grow negatively due to strong yen

Japan’s GDP data for the 4th quarter of 2015 was published, revealing that the real GDP grew 0.66% (year-on-year), slowing down from 1.65% for the previous quarter.

2015-4q-japan-real-gdp-growth

The chart obviously shows the consumption tax hike in Apr, 2014 ruined the uptrend after Abenomics. We will review the elements of the GDP, which indicate more about what is actually happening in the Japanese economy.

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Market outlook, News, US stock market

2015 4Q US GDP: the slowdown of the US economy becomes clearer, the exports sink due to the strong dollar

The US economy only grew 1.80% (year-on-year) in the 4th quarter of 2015, slowing down from 2.15% in the 3rd quarter, according to the real GDP data. Regarding its elements, the personal consumption, the fixed investment, the exports and the imports decelerated respectively.

2015-4q-us-real-gdp-growth

As you see in the chart, the worst element is the exports. It is also notable that the personal consumption did not accelerate despite the radical decline in energy prices.

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Analysis and Practice in the Global Markets