Global Insights: The light from the east

Idea farm
By September 15, 2023 15:30

Global Insights: The light from the east

  • The Japanese economy’s growth has come thanks to Japan’s unique combination of strong corporate operating earnings yields, ultra-low finance costs, and ample opportunities to improve operations.
  • The yen weakened in 2022 as the Bank of Japan (BOJ) prevented domestic yields from rising with those of comparable foreign securities. As the BOJ relaxes and eventually eliminates its cap on government bond yields, the yen should find a more natural level, which would imply a 12% appreciation, per consensus forecasts.
  • The persistence of ultra-low interest rates partly reflects the inefficiency of the corporate sector, whose savings (retained earnings) consistently exceeds investment demand. Over the past decade, policymakers have pressured companies to boost return on equity targets and divest non-core assets.
  • As these efforts intensify, a more robust market for corporate control is likely to emerge

Idea farm
By September 15, 2023 15:30

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