"The Democratic Party cannot be an instrument for combating the social crisis. Like the Republicans, it is unalterably committed to the defense of the profit system and shares responsibility for the bipartisan assault on the working class. The Democrats have moved steadily to the right over the past four decades, abandoning whatever remained of the reformist policies of New Deal liberalism and the social-welfare programs of the 1960s." Patrick Martin, The message of Wisconsin, World Socialist Web Site
foreign asset managers have unloaded ¥5 trillion ($46 billion) of Japanese stocks over the past 13 weeks, the longest such stretch since 1998, and the largest amount since records have been kept starting in 1993, according to Bloomberg, “as economic reports deteriorated, stimulus from the Bank of Japan backfired, and the yen’s surge pressured exporters.”
“If foreigners don’t come back, the future of Abenomics could be jeopardized,” Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management, told Bloomberg. And this might trigger a “downward spiral.”
That downward spiral has already commenced: the Nikkei stock index plunged 25.7% from its recent high last June – deep into a bear market.
The Japanese have long harbored a visceral distrust of their own stock market, having gotten burned so badly for so long, and their distrust is once again validated. So foreign investors are crucial in propping up the market. They account for about 70% of the value of stocks traded at the Tokyo Stock Exchange, according to Bloomberg. Between 2012 and 2015, during the hope-and-hype days of Abenomics, they bought a net ¥18.5 trillion of shares. Now foreigners are learning what the Japanese have known for years, and they are bailing out.
For global equity investors and Shinzo Abe, it’s splitsville.
Starting in the first days of 2016, foreign traders have been pulling out of Tokyo’s stock market for 13 straight weeks, the longest stretch since 1998. Overseas investors dumped $46 billion of shares as economic reports deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters. The benchmark Topix index is down 17 percent in 2016, the world’s steepest declines behind Italy....
Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management Co., fears a downward spiral. Foreigners are needed to boost the stock market, and if equities don’t rise the public will lose confidence and curb spending, as he sees it. That could send Japan back into deflation. “If foreigners don’t come back, the future of Abenomics could be jeopardized,” he said.
Overseas investors, which account for about 70 percent of the value traded in Tokyo shares, bought a net 18.5 trillion yen between 2012 and 2015. Global fund managers, which were negative on Japanese shares for almost all of the five years before Abe came to power, have been overweight every month since, according to a Bank of America Corp. Merrill Lynch survey.
Now that bullishness is dissipating. Overweight positions on Japanese stocks fell for a third straight month in March, with investors’ outlook on the economy dimming and concern over earnings growing, the Merrill Lynch survey showed. They’ve sold a net 5 trillion yen since the second week of January, the longest stretch since 16 weeks of selling in 1998 and the most in records going back to 1993....
What’s helped other equities markets has been hurting Japan. The Federal Reserve’s cautious tone on interest rates erased the year’s losses in the Standard & Poor’s 500 Index, but it also weakened the dollar and pushed up the yen. Meanwhile, concerns about global growth also sent investors to the safety of Japan’s currency, which is trading at the strongest level since October 2014.
The impact on profits could be severe. Masahiro Suzuki, analyst at Daiwa Securities Group Inc., says earnings, which likely posted double-digit growth last quarter, will fall by almost 10 percent in the three months ending in June....
The economy is also signaling cause for concern. Abenomics got off to a good start, with consumer prices steadily rising toward the BOJ’s 2 percent goal until mid-2014. There is now little sign of inflationary pressure in Japan. Prices in February didn’t rise, wage growth is slow and the economy contracted last quarter. Hitoshi Ishiyama, chief strategist at Sumitomo Mitsui in Tokyo, estimates core CPI will be zero or negative from March.
“We’re about to see a world where everything achieved through the BOJ’s easing will vanish,” Ishiyama said. “The lack of trust in Abenomics, zero results from the BOJ’s stimulus, risks of sliding profits from a stronger yen -- it’s not surprising foreign investors will want to re-evaluate their investments in Japanese stocks.”
Federal Reserve Chairwoman Janet Yellen is being too cautious about raising interest rates, and will come to regret the slow pace of hikes when the labor market and inflation overheat next year, says Stephen Stanley, chief economist for Amherst Pierpont Securities and the winner of the Forecaster of the Month award for March.
He thinks the Fed should have raised the federal funds target rate (now in a range of 0.25% to 0.50%) above 1% by now, but even he can’t see the Fed raising rates more than twice in 2016. That slow pace will put the Fed seriously behind the curve with the economy at full employment and with inflation breaching the 2% target.
The Fed will be forced to pick up the pace. Stanley expects the Fed to raise rates five times in 2017 and five more times in 2018 in order to keep the economy from overheating too much. Inflation is likely to approach 3% by the end of 2017.
“I look for GDP growth to return to a solidly above-trend pace over the balance of this year as the inventory correction winds down, the pace of deterioration in net exports moderates, and the drag from oil and gas production declines lessens,” Stanley said. “Labor markets are only going to get tighter, and wage gains are likely to move substantially higher.”
Yellen has argued that global economic and financial fragility poses a significant threat to the U.S. economy, which is why the Fed is going so slowly. But Yellen’s concerns are “excessive, Stanley said.
The Syrian Arab Republic’s Prime Minister, Dr. Wa’el Al-Halaqi, issued a statement on Sunday, asserting that the Syrian Arab Army (SAA) and Russian Air Force are preparing a large-scale offensive to liberate the provincial capital of the Aleppo Governorate from the armed groups inside. “The Russian Air Force and Syrian Army are preparing to restore security to Aleppo and Damascus; we are determined to liberate these cities from the terrorists.”
Obama criticized Texas Senator Ted Cruz, one of the two leading Republican presidential hopefuls, for proposing to “carpet-bomb innocent civilians,” which Obama described as “not a productive approach to defeating terrorism.” His Fox interviewer, Chris Wallace, did not point out that Obama had just deployed to the Iraq-Syria war zone an undisclosed number of the planes infamously linked to carpet-bombing.