Buri Notes

Source: FT, WSJ, Nikkei.

EU summit of June 28: also FRA-ESP-ALL-ITA on June 22 in Rome:
- FRA-ITA forte convergence de vue (Hollande-Monti). Italy as a bridge b/w FRA and GER: 1) ITA closer to FRA. Idée « d'une plus grande attention à la croissance » mais « ce qui ne signifie pas l'abandon ou une attention mineure à la discipline budgétaire ». GRE: souhait qu'Athènes reste dans l'euro et respecte ses engagements + c'est un pays souverain, c'est au peuple de décider. 2) ITA closer to GER: a- economic libéralisation; b- sale of state assets; c- financial transaction tax, support of Rome but difficult to adapt unilateraly.
- FRA-GER. Election in GER Sept. 2013. Meeting Hollande SPD leaders in Elysee. SPD open to FTT both bcse fiscal discipline and fiscal ressources and growth... but too early for eurobonds with 79% of GER opposed. Candidates: 1) Sigmar Gabriel, pdt; 2) Frank-Walter Steinmeier, MP group; 3) Peer Steinbrück, ex-MOF.
- GER: "Germany’s resources are not unlimited". Opposed to eurobonds and financial package, but agreed for ECB as financial supervisor. Cf. speech to Parliament: http://www.ft.com/intl/cms/s/0/6a8307be-b60d-11e1-a511-00144feabdc0.html#axzz1xnsaPKfr. At the same time, Parliament approved additional budget for ESM. Avec ce collectif budgétaire, le déficit fédéral s'élève désormais à 32,1 bnE et non 26,1 comme prévu initialement.

= TO DO: list on dividing lines, eurobonds, etc. =

What is the deposit insurance scheme?

What sweeteners for GRE? 1) further reductions in interest rates and extended repayment periods for bailout loans; 2) EU money to spur investments in Greek public works programmes through the European Investment Bank.

Internal politics:
- GER: Joachim Glauck imposed to Merkel for pdt by FDP and by opposition; opposed in 2010 when proposed by Greens and SPD; mistake of putting Christian Wulff, PM Lower Saxony. Civil right activist, Protestant pastor.
- FRA rating: Moody's and Fitch AAA but negative perspective; Standard & Poor's with AA+.

Quelle politique industrielle?
- Beffa: ne pas gaspiller, 300 moE dans projet Ulcos pour survie des hauts fourneaux de Florange; "pour 300 millions, vous pouvez vous payer la plus moderne unité d'Europe dans le photovoltaïque. Faut-il à tout prix chercher à sauver une industrie désavantagée au niveau planétaire, ou parvenir à être compétitifs dans des secteurs nouveaux ?"
- Montebourg: "La solution ce ne sont pas les plans de coupes budgétaires, c'est d'avoir une BCE qui fasse son travail, qui atténue l'endettement public, qui finance la croissance . Que l'Union européenne ait refusé de se débarrasser des dettes publiques en les faisant financer par la taxe sur les transactions financières est une faiblesse dans la compétitivité mondiale. Ce sont les autres pays qui vont créer les produits de demain pdt que nous sommes occupés à rembourser des dettes".

JPN
- JAL to relist in Sept.; Komatsu to reduce power usage by half over three years, already 40% on our goals;
- JGB: Traders Backing Off From Ultralong JGBs Ahead Of Greek Poll, bid-to-cover ratio of 2.5, compared with 3.73 earlier.
- Renesas To Get Y100bn In Aid From Shareholders, Lenders. Shareholders: Hitachi, Mitsubishi, NEC with 50 bnY and BOTMUFJ, Mizuho Corporate Bank, MUFJ Trust and Banking and Sumitomo Mitsui Trust Bank 50 bnY.

JPN. Comment from Curtis. "It appears more and more that perhaps the major achievement of the transfer of political power … has been to bring about policy convergence between the country's two major parties," said Gerald Curtis, aColumbiaUniversitypolitical scientist specializing in Japanese politics.  "Terrific if that means an end to fruitless ideological debate and a focus on a more substantive policy debate. Not so terrific if it means that voters can't figure out what the differences between the parties are. The DPJ has retreated almost completely from its political reform goals. They're at least as dependent on the bureaucracy as the LDP ever was."

Career. http://online.wsj.com/article/SB10001424052702303877604577383852429038244.html?mod=career_newsreel. "I love solving problems,'' Ms. Bishop says. "That's emotional cookies for me."

Source: Nikkei 6/5-14 (Politics, Finance, Money & Markets, Energy, Industry). Check also most read: http://e.nikkei.com/e/fr/mostread.aspx & http://e.nikkei.com/e/fr/tnw/index.htm

Backlog of old bills before the end of the Diet:
- Nuclear regulatory commission to be created in Sept. 2012; independant from METI, unlike NISA; commission members to be appointed by Diet; limited right of PM to give instructions; decommissionned after 40 yrs (PDJ), provision of 20 yrs extension (LDP) dropped.
- Pension. DPJ agreed on full-fledged pension bonds, which would be repaid with the additional revenue generated by raising the consumption tax; had proposed not paying before actual augmentation but opposed by LDP. Social security. http://e.nikkei.com/e/ac/tnks/Nni20120613D13JF324.htm. Minimum pension (DPJ) dropped.
- Income tax. Off the table, from 40 to 45% and inheritance to 55% from 2015. Welfare payouts of 1989 and 1997.

Why REIT attractive? Average dividend yield of 6% (2.6% TSE's first section and the 0.85% on 10-year JGB). Buyers: foreign investors, regional banks and other domestic institutional investors. Also center on domestic real estate, so less vulnerable to the exchange rates and overseas news (#Trevor Hill, UBS Securities Japan)

Record output for automakers. Total 26 mo. Toyota 8.7 mo (Corolla compact sedan in China, SEA Fortuner sport utility vehicle, Aqua hybrid in Japan); Nissan Motor [7201] Tiida compact JV Guangzhou, global production target 5.4 mo. Honda Motor Co. [7267] hit hard by the Great East Japan Earthquake and flooding in Thailand, 4.3 mo. The eight Japanese automakers' share of the global market for new vehicles: from 32% in 2008 to 27% in 2011 (#IHS Automotive).

Why the failure of the chip industry ? – Act I : back in 1990s, tendency to focus on domestic market ; US and JPN with 40% of global chip demand (in the US, demand skewed toward computers, in Japan chips mainly used for consumer electronics - TVs, video players, video game consoles).Leading consumers : Sony, Matsushita Electric Industrial, Dell, Compaq… Japanese chipmakers prioritized supplying domestic customers bcse the home market was large enough to provide the economies of scale crucial for their businesses. – Act II :
1) Japanese consumer electronics giants lost their global competitiveness, chipmakers followed them into decline. By 2011, largest consumers Apple, Samsung and HP (17 bn$ + 16 bn$ both) ; Sony only 6th with 8 bn$, Toshiba and Panasonic much smaller share.
2) Lack of solid commitment by top executives to expanding their chip operations. Samsung grew by making bold investments when the market was in bad shape. Sony has secured a 36% share of the global market for imaging sensors bcse the company's CEOs have firmly committed to nurturing the business even in hard times.

IMF. "We have looked at the current account development and the extent of yen appreciation over the last year, and have concluded that now the yen is moderately overvalued" (Lipton).

Misc.

- Australia-Japan FTA, 16 round, since Aug. 2007.
- Light side. Ishii: Ishii's husband, who was a subordinate at the MOF, left the ministry and has changed jobs to travel with her on each of her overseas assignments. "Support from my other half is always behind my success," she said.
- BOJ candidates: http://e.nikkei.com/e/ac/tnks/Nni20120611D1106A14.htm
- ODA 1.49 troY, up 155 bnY: http://e.nikkei.com/e/ac/tnks/Nni20120611D11JF113.htm
- China: # Masataka Maeda Senior Economist JCER.
- Birth rate at 1.39 after record

Source: Nikkei 6/5-14 (Politics, Finance, Money & Markets, Energy, Industry). Check also most read: http://e.nikkei.com/e/fr/mostread.aspx & http://e.nikkei.com/e/fr/tnw/index.htm

Backlog of old bills before the end of the Diet:
- Nuclear regulatory commission to be created in Sept. 2012; independant from METI, unlike NISA; commission members to be appointed by Diet; limited right of PM to give instructions; decommissionned after 40 yrs (PDJ), provision of 20 yrs extension (LDP) dropped.
- Pension. DPJ agreed on full-fledged pension bonds, which would be repaid with the additional revenue generated by raising the consumption tax; had proposed not paying before actual augmentation but opposed by LDP. Social security. http://e.nikkei.com/e/ac/tnks/Nni20120613D13JF324.htm. Minimum pension (DPJ) dropped.
- Income tax. Off the table, from 40 to 45% and inheritance to 55% from 2015. Welfare payouts of 1989 and 1997.

Why REIT attractive? Average dividend yield of 6% (2.6% TSE's first section and the 0.85% on 10-year JGB). Buyers: foreign investors, regional banks and other domestic institutional investors. Also center on domestic real estate, so less vulnerable to the exchange rates and overseas news (#Trevor Hill, UBS Securities Japan)

Record output for automakers. Total 26 mo. Toyota 8.7 mo (Corolla compact sedan in China, SEA Fortuner sport utility vehicle, Aqua hybrid in Japan); Nissan Motor [7201] Tiida compact JV Guangzhou, global production target 5.4 mo. Honda Motor Co. [7267] hit hard by the Great East Japan Earthquake and flooding in Thailand, 4.3 mo. The eight Japanese automakers' share of the global market for new vehicles: from 32% in 2008 to 27% in 2011 (#IHS Automotive).

IMF. "We have looked at the current account development and the extent of yen appreciation over the last year, and have concluded that now the yen is moderately overvalued" (Lipton).

Misc.

- Australia-Japan FTA, 16 round, since Aug. 2007.
- Light side. Ishii: Ishii's husband, who was a subordin

Source: WSJ (11-12-13-14) –TJT (12-13-14) - FT

JPN – Economists nominated for the BOJ board: Kiuchi (Nomura) and Sato (MS-MUFG) to succeed Hidetoshi Kamezaki and Seiji Nakamura, terms expired April 4. Ryutaro Kono, opposed to more general easing, voted down by the board. Both urge the BOJ to do more. The two vacant slots traditionally filled with people from the private sector. Maiko Noguchi, top economist at Daiwa Securities.

SPA – Bankia: 1- Bad loans to real estate sector; 2- Overconfidence: Sept 2011 raised capital, but refused 10 bn€ as advise but only 4 bn€ to avoid eroding capital; created in 2010 from seven troubled cajas. Instead on focusing on international investors, focused on Spanish investors, managed to raise 3.1 bn€, less 2% from outside SPA. New capital requirements with Basel III the reason for the increase.
- April 25: the IMF made a report warning that 10 Spanish banks in danger, singling out Bankia; regulator Roldan inTokyofor a roadshow.
- May 7: resignation of Rato.

EZ - The markets believe FRA will be save but are probing to see whether that will be the case for SPA and ITA cf. in 1992. FRA no real estate bubble but debt at 87%, SPA with real estate bubble but lower debt. Trichet, Sept. 22, 1992: message to force GER to act, can’t teat us the same way asUK and ITA. How strong the parallel? 1- No Kohl-Mitterrand relation, 2- larger GER allies (FIN, AUS, NTH), 3- amount at stake larger (then 19 bn€ swap line).

GRE - CA prepare for GRE exit. Greek exit is not the most likely scenario. But pressing ahead with contingency plans. If consolidation of Emporiki with other banks, stake would be reduced to 10%. Plan to transfer good assets to CA. Cost: reputational risk for largest foreign-owned retail bank; in ARG departed from its unit. But has fulfilled its obligation as a majority shareholders. Direct funding of 4.6 bn€; could not tap the Emergency Liquidity Assistance from the GCB until June. – Geniki bank owned by SG: the bank would be protected no matter what (Oudea). – Expect nationalization by Hellenci Financial Stability Fund.

CHN – Beijing finds a path to liberalizing rates. Low interest rate => contribute to investment heavy growth. But wide margin loan-deposit compensate the bank for low returns.

GER – 1- Direct exposure. Commitment to crisis-fighting efforts at 113 bn€ or 4.4 % of GDP (GRE, EFSM, EFSF); if all used, 400 bn€. 2- Indirect exposure: 57 bn€ through the ECB (212 bn€ of financially stressed government bonds). 3- Target 2: central banks have taken over from private markets in funding current-account deficits; under the gold standard, would have been settled by transfers of gold; GER surplus of 644 bn€. Total: 110 + 60 + 640 = 810 bn€. (Credit Suisse).

Q&A

What is target II?

What are double-decker fund*?  JPN: equity on top of currency (Global High Yield Stock Premium of Nomura, Rakuten Investment Management…). 120 bn$;Brazil real 50%,Australia 20%, basket 20%. Triple-decker: call options on top of the securities. Regulators.

Misc/ Data

- BIS interbank loans.
- Insider trading inJapan(Tepco, Inpex, Mizuho) for IPO, SESC and FSA investigation.
- Kraft moving from NYSE to Nasdaq, Time Square advertising billboard and cost-saving.
- AFG - Mes Aynak copper mine, delay bcse security, discovery of ancient monastery, etc.
- JPN - Machinery order up. Masukawa, Daiwa Institute of Research (machinery orders). Hideki Matsumura, JRI.
- KOR-CHN-JPN FTA, NTB in JPN according to KOR. Keya Iida, deputy DG at METI.
- KOR –North Korealauncher from CHN, in violation of arm embargo (fromCambodiafreighter checked by JPN coast guard).
- JPN- Dormant accounts at 85 bnY, up to 10 years (30 yrs for Japan Post), only 40% return to depositors; about 10 accounts per person in JPN.
- Energy: LED 40 times longer and 20% of energy; discontinue incandescent bulbs, still 50% of the market.
- JPN – Mobile game market, from 4 bn$ to 18 bn$ by 2015; “freemium”, i.e. free but some additional tools sold; 30% split of revenues with Apple, Google or Microsoft. Yoshikazu Tanaka, 35, founded 2004, 234 mo registered users. Rage of Bahamut.

Les echos (6/11)

ESP - Plan mise en place: 240 bnE GRE, 100 bnE ESP, 85 bnE IRL, 78 bnE POR. Total: 500 bnE. Impact sur la dette FRA: 100 bnE x 20% = 20 bnE = 1 pt PIB. Recommandations FMI 40 bnE. FROB: fonds public soutien secteur bancaire espagnol.
Q1- Pourquoi acceleration? Avant vote 17 juin GRE. "La premiere fois que saute le pas avant que trop tard".
Q2- Pourquoi les banques uniquement? Calcul si ESP total 450 bnE... mais MES 500 bnE. Bankia 23 bnE besoin capitaux. Un sauvetage complet de l'ESP viderait les mecanismes europeens.
Q3- Qui prete? FESF. Taux 3%. Supervision FMI-BCE-CE. Conditionalite: restructuration secteur bancaire espagnol, comme IRL.
Q4- Quel impact sur bqs FRA? Exposition 700 moE SG, 300 moE BNPP, 140 mo CA, 40 moE BPCE = 1.2 bnE.
Q5- Pourquoi pbl Bankia? 300 bnE d'actifs, #4, 12 mo clients, fonds propres 9.5%, portefeuille immobilier 45%. Fusion des cajas... mais BDE autorise des fusions politiques, "la grande caisse du PP". Projet pharaonique de Valencia. Restructuration en 2011 avec BFA et Bancia. Introduction en bourse avec decote 30%. 25 avril auditeur refuse valider les comptes, 7 mai Rajo demissionne...

FRA - Conjoncture +0 T1, -0.1 T2 (BDF). Impots sur les societes: retour plus faible que prevu, -6 pc 2011-12. Cour de justice europeenne: OPCVM etranger paiement de 4,3 bnE pcq taxation dividende 30% vs. 0% exoneres.

? Armateurs grecs: defiscalises comme les francais?

EUR - Echeances:
6/14 Monti-Hollande,
6/17 elections Grece,
6/18-19 Los Cabos,
6/21 Ecofin,
6/22 sommet ESP-ITA-FRA-ALL.

EU - Union bancaire : 1- surveillance centralisee des banques, 2- mecanisme assurance depot, 3- meme schema de resolution des crises. Eviter bank run et flight to quality. Fonds commun de garantie des depots, donc ressource budgétaire commune.
Reaction UK: 1- Risque du contribuable pour GRE ou ESP. 2- Distorsion de concurrence en faveur des membres, negatif si Londres absent.

FRA. Dispositif carrière longues (17 ans), étendu à 18-19 ans, couterait moins que prevu à l’Etat ; deux trimestres pour femmes et chomeurs. Cout passerait de 1 a 3 bn€ par an entre 2013-17 ; 110 000 personnes environ. 60 mo -> 30 mo actifs -> 0.8 mo par classe d’age -> 0.1 concerne (12% pas 25%).

Les Strauss-Kahn.

WSJ

- DATA: European Payment Index, delay in payment for public authorities, consumers, business…*
- Aquino to visit the US
- (Alina Dizik) Mastering the epic art of American slang.
- (ID) Apple and google expand in mobile phone.
- Under earth, rocks or a hard place (John Miller)

TJT (6/4-5-8)

Eco

- Panasonic to bankroll Olympus.
- Plan to move from wooden house to apt block.
- Center for Work Life Policy study. 2012 MWHL White Paper on children, child-rearing and mothers, 83% want to work. 
- TEPCO wages at 5.7 moY or 0.28 higher than for same size company, plan to increase further by 0.46.
- Panasonic considering cutting 3-4 k people out of 7 k HQ. Slash worforce by 36 k to 330.
- Jama six barriers: yen, tax, electricity, labor, FTA, CO2.
- Tax cooperation Jpn and Kor.

* ROGOFF. Austerity vs. debt. Naïve debt-ceiling absolutists (can’t walk away from responsibility, cost of abrupt change…) Simplistic Keyensians: debt over 90% of GDP is a long-term drag on growth, high-debt episode lasted 23 years, income 25 % lower. Drag on growth: eventual need to raise tax, lower investment. Also lower interest rate**. Expanding the debt above 90% is a risk.

Misc

- C134 and C137  of 4 and 6 Bq/kg in tuna blue fish. - La Hague convention not retroactive; father return child when ‘cold shutdown achieved at Fk1’.
- Was Li really a spy? Judge unsure to indict him: maybe job search; received fees instead of paying for information; only issue false identity to renew alien registration card. Press speculation.
- Stay or go? 10% of California cost protected by seawall, but rise of sea level 18 pc 20c and set to rise 30-40 cm by 2050; decision to abandon some public lands; Alaska relocation on higher ground,
- Beat Takaeshi’s comment that Obama with allowed marriage to animals, Eri Watanabe (Shall we dance, 1996). Humor on the weak, not articulate.