BOJ Nomination, Emporiki exit, Bankia, Double-deckers

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.