Bloomberg English News "Japan's Government Pension Fund to Diversify to Avoid Erosion of Asset Value"; Bloomberg Japan "Government Pension Fund Will Have Positive Return This Year"

It's about the same news, written by the same reporters.

It was quite common for both the Japanese news outlets that also have English language service and the US news outlets that also have presence in Japan to report different stories for their Japanese audience in Japan and for their foreign audience in English language when reporting on the Fukushima I Nuclear Power Plant accident.

When it comes to bad news for the economically clueless Japanese citizens, Bloomberg News seems to be doing the same as it reports on the decision by the Government Pension Investment Fund (GPIF) to start planning for diversification of their JGB-heavy portfolio.

I first saw the article in English at Zero Hedge, and looked for the same article in Japanese Bloomberg News to tweet to my Japanese followers. I found the Japanese article, written by the same reporters based in Tokyo, but I was completely confused. Instead of quoting the manager of GPIF warning the potential erosion of asset values because of the new LDP administration's policies as in the English article, the Japanese article starts out by saying:

The return will be positive two years in a row due to cheaper yen, says the manager of GPIF.

Huh?

So, here are the opening paragraphs of Bloomberg English (2/3/2013) titled "Japan Pension Fund’s Bonds Too Many on Abe Plan, Mitani Says", by Anna Kitanaka, Toshiro Hasegawa & Yumi Ikeda:

Japan’s public pension fund, the world’s biggest manager of retirement savings, is considering the first change to its asset balance as a new government’s policies could erode the value of $747 billion in local bonds.

Managers of the Government Pension Investment Fund, which oversees about 108 trillion yen ($1.16 trillion) in assets, will begin talks in April about reducing its 67 percent target allocation to domestic bonds, President Takahiro Mitani said in a Feb. 1 interview in Tokyo. The fund may increase holdings in emerging market stocks and start buying alternative assets.

The GPIF, created in 2006, didn’t alter the structure of its holdings during the worst global financial crisis in 80 years or in response to the 2011 earthquake and nuclear disaster. Prime Minister Shinzo Abe and the Bank of Japan (8301) have pledged to restore economic growth and spur inflation, which will mean higher interest rates, Mitani said.

“If we think about the future and if interest rates go up, then 67 percent in bonds does look harsh,” said Mitani, who was appointed in 2010 after serving as an executive director at the Bank of Japan. “We will review this soon. We will begin discussions for this in April-to-May. Any changes to our portfolio could begin at the end of the next fiscal year.”

GPIF, one of the biggest buyers of Japanese government bonds, held 69.3 trillion yen, or 64 percent of total assets, in domestic debt at the end of September, according to its latest quarterly financial statement. That compares with 12 trillion yen, or 11 percent, in Japanese stocks; 9.6 trillion yen, or 9 percent, in foreign bonds; and 12.6 trillion yen, or 12 percent, in overseas stocks.

The fund, which took over management of government employee retirement savings when it was set up, returned to profit in the three months ended Dec. 31 from a 1.4 percent loss in the first six months of the fiscal year, Mitani said. He declined to be more specific. It needs to raise about 6.4 trillion yen this fiscal year through March 31 to meet payments.

And here's my translation of the opening paragraphs of the Japanese Bloomberg article (2/4/2013) by the same reporters:

世界最大の資産規模を持つ日本の年金積立金管理運用独立行政法人（ＧＰＩＦ）は、昨年12月以降の円安進行や株高基調を背景に、今年度の運用収益率が２年連続でプラスとなる見通しを明らかにした。

Japan's Government Pension Investment Fund (GPIF) that holds the world's beggest assets revealed that this fiscal year's return will be positive, two years in a row, thanks to cheaper yen and higher stock market since December last year.

三谷隆博理事長は１日、ブルームバーグとのインタビューで、2012年度の運用状況について、「昨年12月以降、株価が上昇し、円安方向に振れたのでかなりプラスが出ているのではないか。７－９月期までの年度収益率はマイナスだったが、これを取り戻してプラスになっていることは間違いない」と語った上で、11年度の2.32％に続いてプラスになるとの見通しを示した。

President Takahiro Mitani said in a February 1 interview with Bloomberg about the fund performance in the fiscal 2012 [which ends in March 31, 2013], "Stock prices have gone up and Japanese yen has gone down since December last year, so I assume the return has turned positive in a significant way. The annualized return up to the July-September quarter was negative, but I have no doubt that the return has turned positive." In the fiscal 2011, the return was 2.32%.

ＧＰＩＦの今年度の収益率は、４－６月期にマイナス1.85％だったが、７－９月期は外国株式の上昇が寄与してプラス0.49％。４－９月累計ではマイナス1.39％だった。

The rate of return at GPIF this fiscal year was minus 1.85% in the April-June quarter [1st quarter of the fiscal year], but in the July-September quarter the rate turned positive to 0.49% thanks to the rise in foreign stocks. The cumulative rate of return from April to September was minus 1.39%.

Rejoice, the government pension fund will make money this year!

Later, the Japanese article talks about Mr. Mitani's concern about the Japanese Government Bonds which makes up more than 60% of their portfolio, but in a much more subdued way; there is no talk of change in portfolio possibly starting at the end of the next fiscal year.

Let's see, GPIF has 108 trillion yen, and Mr. Mitani says the fund will make money. How much money will be the question, as Bloomberg English article says the fund has to raise 6.4 trillion yen to meet the payment obligations. That would be the equivalent of almost 6% return on the total asset.

Instead of focusing on writing the grammatically correct English devoid of meaning or on native-like pronunciation of English words and sentences (native in where is a good question, but), the Japanese people should really study English, so that they can read and understand the Bloomberg English article.

But even before their English lessons, they probably need economic lessons (and need to stop adoring Krugman, for a start).

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Japan's Exports Drop 10% YOY in September, Most Since March 2011, As Imports Spike to Avoid Tax Increase on Oil

Japanese economy may have two consecutive quarters of contraction, which is the definition of "recession".

DPJ's Seiji Maehara, whose ministerial portfolio includes economy, finance, nuclear policy, and national strategy (virtually eliminating the need for the cabinet), pushes Bank of Japan for more monetary stimulus. He is silent on 20-plus years of fiscal stimulus by the Japanese government that has gone nowhere.

The most decline came from exports to the EU, dropping 21.1 percent, followed by exports to China that dropped 14.1%, according to Bloomberg. (I guess they don't round the numbers in 2 digits.)

Imports increased more than anticipated, because "“Everyone rushed to pass customs,” before a tax increase on oil imports that began Oct. 1."

Tax increase on oil imports, when the economy is struggling??? What are they thinking?　Oh I see, they are worried about "global warming". Of course. So the tax on 1 kiloliter of crude oil went up more than 10% starting October 1, according to the information from the National Tax Agency.

From Bloomberg News (10/21/2012):

Japan Exports Tumble 10% as Maehara Presses BOJ to Ease: Economy

Japan’s exports fell the most since the aftermath of last year’s earthquake as a global slowdown, the yen’s strength and a dispute with China increase the odds of a contraction in the world’s third-largest economy.

Shipments slid 10.3 percent in September from a year earlier, leaving a trade deficit of 558.6 billion yen ($7 billion), the Finance Ministry said in Tokyo today. The median forecast in a Bloomberg News survey of analysts was for a 9.9 percent export decline. Imports rose 4.1 percent.

Economy Minister Seiji Maehara pressed the Bank of Japan for more action yesterday, saying the nation is “falling behind” in monetary stimulus and is at risk of another credit- rating downgrade. The BOJ today cut its view of eight out of nine regional economies while Taiwanese unemployment rose to a one-year high, underscoring weakness across Asia after China’s third-quarter growth was the slowest since 2009.

“There’s a high chance that Japan’s economy will have two consecutive quarters of contraction through December,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “The slump in advanced nations is spreading to emerging economies.”

...The decline in shipments, exacerbated by a spat with China over islands in the East China Sea, was the biggest since May last year, when the country was rebuilding supply chains wrecked in the March earthquake and tsunami.

Shipments to China, the nation’s largest export market, slid 14.1 percent from a year earlier. Exports to the European Union fell 21.1 percent, while those to the U.S. rose 0.9 percent. Auto shipments to all markets dropped 14.6 percent.

...The trade deficit was the first in the month of September since 1979 and compared with economists’ median estimate for a 547.9 billion yen shortfall. The rise in imports was higher than a 2.9 percent gain estimated by economists as the country bought more oil and liquefied natural gas.

“The reason behind the increase is very simple,” said Shohei Setoh, a Tokyo-based manager for a crude oil trading group at JX Nippon Oil & Energy Corp. “Everyone rushed to pass customs,” before a tax increase on oil imports that began Oct. 1.

(Full article at the link)

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Japan's GDP Drops 1.1%, and Nikkei Goes Up

because the drop was less than the forecast (which was between -2.0 to -2.4%). Nothing can drop the stock markets of the so-called developed countries any more. BRIC, without the exception of R, have been dropping while Dow, Nikkei, Dax, CAC, FTSE continue to levitate.

From MarketWatch:

LOS ANGELES (MarketWatch) -- Japan's gross domestic product fell 1.1% in October-December on an annualized basis, the Cabinet Office reported Monday, beating forecasts but also marking the first economic contraction since July-September 2009, when the economy shrank by 1.2%. The GDP was expected to fall by 2.4% for the quarter, according to a Dow Jones Newswires survey of economists, and was tipped to drop 2.0% by separate surveys from Bloomberg News and FactSet. On a quarter-on-quarter basis, GDP lost 0.3%, after growing 0.8% in the previous three months.

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Japan's Export In July Grew 23.5% YOY, 8 Straight Months of Growth

Even the mainstream analysts and economists in the US are now talking about the US "turning Japanese", fearfully or resignedly anticipating "lost two decades" for the US.

I'd say that's BS. The US can never be Japan, and it's not just about whether the citizens save.

In the face of rising yen, Japan has managed to have trade surplus every month for 16 straight months, with the last 8 with yoy increase. July export increased 23.5%, with import increasing 15.7%, according to Nikkei Shinbun on August 25, 2010:

• Strong sales to China (22.8% increase) and the rest of Asia - Korea, Taiwan, Singapore, Thailand (23.8% increase) in semiconductor, steel, machinery, and automobile;
• Strong sale to the US (25.9% increase), mostly autos and boilers;
• Sale to the EU muted (13.3% increase), mostly construction machinery to the Netherlands and Belgium.

Japan didn't have the luxury of weaker currency like Germany did which boosted their export and GDP, but nonetheless they managed to sell value-added manufactured goods to the rest of the world and produced the trade surplus.

Although it is a big question whether they can continue with yen approaching 80 vis-a-vis US dollars and 100 against Euro, goods "made in Japan" have a very strong appeal to the newly rich Chinese and other Asians (many of them are already rich). They come to Japan on shopping tours and buy up things that are 100% made in Japan, which, ironically, are getting harder to find as many Japanese manufacturers have outsourced to Asia, particularly China in the past decade.

Clearly, when the executives of these manufacturers decided to outsource, they didn't think that Asians (of all peoples) would eagerly pay premium for Japanese-made goods in the very near future.

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Japan's Tankan Improves, Nikkei Drops Below 10,000

because recent yen surge wasn't priced in ...

Japan Tankan Sentiment Rises for Second Quarter
(9/30/09 Bloomberg)

"Oct. 1 (Bloomberg) -- Confidence among Japan’s largest manufacturers rose for a second straight quarter as global government stimulus spending rekindled exports.

"The Tankan index of sentiment among large makers of cars, electronics and other goods climbed to minus 33 from minus 48 in June and a record low of minus 58 in March, the Bank of Japan said in Tokyo today. A negative number means pessimists outnumber optimists."

Now the Tankan sentiment has recovered to the level of 2001 recession, according to Bloomberg. Although the numbers improved, companies continue to slash inventories and slash/withhold capital investment. Capacity utilization also remain low. 1/3 of Toyota's factories will remain unused, and the company will reduce capital investment by 36%.

The Tankan result is weighing heavily on Nikkei, which dropped 143 points to dip below 10,000 at the close of the morning session. Currently (at 1:18 PM Japan Standard Time) it is down 165 points to 9,967. The reason?

Japanese yen.

Companies surveyed in the Bank of Japan's Tankan based their business outlook on Yen/Dollar exchange rate at 94.50 yen/dollar, according to Japan's Nikkei article (in Japanese). Yen is currently trading in Japan at 89.79-89.82. Most exporters have priced in yen fairly stable at mid 90s. If the pace of appreciation of the currency is gradual and over time, stronger companies can still adjust, without abandoning their manufacturing base within Japan. However, rapid appreciation in short time to mid to lower 80s could finally kill off manufacturing in Japan.

It would then have little choice but to become like the U.S.: consumer-driven economy with majority of employment in the service sector, and with increasing government share in the economy.

According to the stock market commentary at Nikkei Net, the market does not like the uncertainty of the new Hatoyama administration, which is yet to clearly define its policies.

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