Attention, the Rising Sun of interest rates is about to take off. Maybe already today, maybe tomorrow at most in a month Central Bank of Japan, will declare maintenance of the long one season of falling rates, which began in 1991, started to slide into recession. The result? A long harakiri, of the third largest economy on the planet, plunged into a dramatic "liquidity trap” of Keynesian memory which for more than a generation, as happened in the crisis of the 2016s, pushed the Japanese to postpone spending because, thanks to deflation, “what costs ten today, tomorrow you will buy for nine.” It took more than thirty years to get to the bottom of the "trap", almost ten since, in XNUMX, the Bank of Japan pursued a sub-zero rate policy, the last attempt to give relief to the debt-ridden economy of oxygen.
Japan: average wage increase is coming
Now, perhaps already today, the turning point. Last Friday the union representatives announced that, at the end of the negotiations with the country's leading companies, a decision had been made average increase in wages in the order of 5,28%, by far the highest since the beginning of the nineties, destined to set in motion, together with the increase in wages, also the increase in rates. With the blessing of everyone, from the government to the social partners. Up to the large investors who, in the wake of Warren Buffett, anticipated the awakening of Japanese finance, one of the favorites today by Black Rock and the other Bigs. The promotion of a country that raises paychecks along with the cost of money may appear bizarre at first glance. But this is the result of a long series of paradoxes that have severely tested the resistance of the system conditioned by growing public debt (in the face of large private savings. Even more paradoxical, points out the Wall Street Journal, the moderation, or rather the fears, with which the Japanese are reacting to the increase in salaries. Prime Minister Kishida's popularity has slipped to lows (-25% in a few months) while the spread has spread fear of rising prices. And so the big names in industry welcome the new situation, starting with Toyota, who welcome the increase in wages, but not the small companies, worried about the explosion in costs.
Japan: the "price revolution" begins
La price “revolution”. anyway she left. And it will have important consequences for everyone, including our home stock markets.
Japan, in fact, will soon cease to be there basis of the global carry trade. For decades, Japanese finance has supported speculative operations: people borrow in yen, at zero interest, and then reinvest in other currencies. Will it still be like this? Probably not. This is how RBC BlueBay sees it, which is among the subjects it has recommended for some time sell yen on the expectation of the end of the age of deflation. “We think cash rates in Japan will rise to 0,5% this year, with inflation exceeding national consensus forecasts.” The Canadian management house also recommends sell Japanese debt as it expects to see the 1,25-year at a 0,77% rate of return by the end of the year, from the current XNUMX%.
The change of scenery does not affect the stock market which continues to fly
The change of scenery It shouldn't be about equities reached the highest levels in history at the beginning of March under the push of Softbank or Asahi Intecc, world leader in the production of cardiovascular assistance devices, rather than Oriental Land, which manages Disneyland Tokyo, the most popular theme park in Asia, where Tokyoites of all generations and passing foreign tourists enjoy the Japanese version of American cultural classics.
Tokyo is "a market that many global investors have neglected for too long", reads the note signed by Dowding. BlackRock and Man Group are among those convinced there is further room for upside.
Yue Bamba, head of Japan active investment at BlackRock, believes that the central bank will raise rates very gradually, being very careful to maintain stimulating accommodative conditions. Earlier this month, Goldman Sachs strategists Kazunori Tatebe and Bruce Kirk raised their twelve-month target for the Topix broad index.
