Japanese Stocks Rally as Weakening Yen Boosts Exports

The Nikkei stock average rose 230.83 points on Tuesday as Japans main export market shares increased in response to the ever declining yen.

Sony, Toshiba, Canon and Fast Retailing were among the big movers in the electronic sector, most adding at least 2 percent. Meanwhile, in the auto-production field, Honda and Toyota both gained 1 percent. Mitsubishi UFJ Financial, Japans banking heavyweight, is also on the rise while in the oil area JX Holdings and Inpex lost a percentage point each.

Graham Palm, Executive Vice President at Shizuoka Financial commented, “Having reported five straight months of gains the Nikkei is on course to add a sixth as both central bank support and a weaker yen continue to provide a significant boost to exporters.”

Amid rumours the Canadian wildfires approaching the oil-sands will be halted due to lower temperatures and favourable winds, crude oil futures dropped significantly on Monday. Oil for delivery next month dipped $1.26 or 2.8 percent to $43.68 a barrel on the NYMEX.

Another stock falling is Takata Corporation whose airbags have been ruled faulty and spurred the government to recall over 6 million vehicles in response. The recall will add to the already massive worldwide tally of cars recalled to about 125 million. Takata Shares are currently losing almost 7 percent.

European markets had mixed results at close on Monday. The FTSE dipped slightly by 0.3 percent, the German DAX climbed by 1.2 percent and the French CAC 40 Index jumped by 0.5 percent.
Last week’s currency market saw the greenback trading in the 107 yen-level, increased from the upper 106 yen level at Tokyo’s Monday close.

Wall Street stocks were also mixed at close on Monday, as floor traders looked relatively shy to make any major moves amid the lack of significant U.S. economic data which was supposed to be released the same day.

The Nasdaq added 14.09 points or 0.2 percent to 4,750.23. The Dow dipped 34.36 points or 0.2 percent to 17,705.99 while the S&P 500 creeped up 1.75 points or 0.2 percent to 2,058.73.

Cars to Act as “Mobile Power Units” Under Nissan Proposal

In a sales initiative meant to show that electric vehicles can do more than just transport people from A to B, Nissan will allow their customers to earn profits from selling excess electricity.

Nissan Motor Co. Ltd said their battery powered cars can become “mobile power units” and compete with ideas such as Tesla Motors Powerwall concept. The company have partnered with Enel SPA, an Italian multinational manufacturer and distributor of electricity and gas, to enable drivers of Nissans electric cars and vans to make money from selling unused battery electricity back onto the grid during times of high national usage.

“This will effectively turn vehicles into a mobile power source” said the chairman of Nissans European operations Paul Willcox, “At the same time; our customers can make big savings on their electricity bills each year.”

Following Volkswagen’s much publicized emissions-cheating scandal and with new governmental regulations rolling in forcing companies to reduce pollution, this new partnership may give consumers one more reason to make the change to battery powered cars. Another incentive is the growing number of countries, like Germany and Japan, who offer subsidies for citizens using green technology. This seems to have offset previous consumer worries regarding high prices and limited range of the vehicles.

Positive Publicity
A full commercial roll out of the scheme will only follow extensive trials involving 200 electric car users who will have Enel’s patented “vehicle-to-grid” programme fitted to their system that will allow them to trade excess energy via National Grid Plc., a British utility firm headquartered in Warwick, UK.

Nissan was assisted in development of their energy storage unit, called “xStorage”, by the power management company Eaton Corp, founded in the US with corporate headquarters in Dublin, who are also partners in the deal.

Graham Palm, Executive Vice President of Shizuoka Financial said, “We think this will have a positive effect on Nissan’s shares. One of the biggest challenges they will face is educating the public and overcoming their unwillingness to make the switch over to green energy. It will be a process.”

Green Regulations
“There would be a necessity for regulators to keep up their current role by offering incentives, not just to consumers but also to industries, to make the move away from petrol and over to greener energies,” said Palm. He added that there should be a correlative tax on vehicles that emit increased levels of pollution.

“I think most people would agree that is the most sensible arrangement,” Palm said in a BBC interview.

“We could be looking at 25% of vehicles being green in the next 30 years if government regulators enforce proposed new laws,” he added.

Bullish Gold May go to $1500

Gold has seen an exciting start to 2016, and one popular financial expert believes the metal could go even higher.

"I believe it is a positively trending bull market," said Graham Palm, Executive Vice President and member of the Management Committee of Shizuoka Financial on Monday. He thinks gold could end out the year 15 to 20% above its current value.

Despite the tendency of gold reach "large, round figures" like $1,300 and "back off," Palm said the underlying trend driving higher valuations remains valid, because of central bank strategies.
"I think the world’s financial powers excluding the US, remain in favour of monetary easing," he said.

Monetary easing tends to devalue a nations currency, possibly driving financial a swing to gold as a value of store. Similarly the low interest rates makes gold more enticing, as currencies become a non-yielding resource.

Palm is certain that the bear market in gold is over, despite the fact that it’s down around 33% from its 2011 high.

China Clings to Positive Factory Growth for 2nd Straight Month

An official survey showed on Sunday that the increase in China's factory activities eased in the month of March reinforcing indications of a tepid economic regeneration, bringing up questions concerning the efficiency of the current stimulus measures.

In April, the government's Purchasing Managers Index (PMI) for the manufacturing sector stood at 50.1 which was above the 50 point level that separates expansion from contraction, but down from 50.2 in March.

According to polls carried out by Reuters, economists had predicted the index to reach 50.4. In March, the PMI also eased from 53.8 to 53.5.

The second consecutive month of manufacturing expansion is a sign of good things to come in the future especially considering the seven concurrent months of contraction before March.

As policymakers attempt to rebalance the economy away from excessive dependence on construction and manufacturing towards consumption, they have utilized stimulus to boost short-term growth. That includes looser mortgage requirements and record high loans by financial institutions.

The slow April PMI numbers released last week shows that the industrial sector gains rose strongly in March, growing by 11.1%. That is faster than the 4.8% profit growth in March which broke a seven-month string of profit declines.

Commodities like oil and steel are the main factors that are boosting profits. The prompt improvement in industrial benefits should increase the overall business activities and stabilize manufacturing, Graham Palm, Executive Vice President with Shizouka Financial wrote on Sunday. In conclusion, this may lead to an increase in household income and the acceleration in discretionary use of this income.

Regardless who gets the White House these stocks could win

The path to the White House is loaded with candidate guarantees, however both Hillary Clinton and Donald Trump would stay focused on spending that benefits two key business sectors in the wake of taking office.

"The way I believe that investors viewing this race should think is that infrastructure [spending] is going to go up regardless of who gets in. Defence is going to increase regardless of who gets in," said Graham Palm, Executive Vice President at Shizuoka Financial.

The rest is unclear, with Trump's positions fluffy on numerous subjects, and Clinton seen leaning more to the left than she would, were it not for her protracted competition against Vermont Sen. Bernie Sanders.

Trump has said he will take a good look at taxes, and that could benefit multinationals. Clinton has held fast on Medicare, or Obamacare as its commonly known, and that could hurt pharmaceuticals, while Trump is against Obamacare so that may affect care organizations. Clinton is liable to proceed with the Obama position on renewable energy, while Trump has not explained his thinking on that subject.

"I'm seeing two altogether different financial approaches, where the Trump policies are centred on corporate tax changes, and the Hillary policies are focused on infrastructure improvement," said Palm.

Trump is immediately linked with defence and infrastructure. In his triumphant discourse in Indiana Tuesday where he secured the lead in the GOP race, he promised to spend to reconstruct America's bridges and main highways and to "take out ISIS."

"The defence industry is going to stay hot regardless of who is President," said Kim Wallace, head of Washington strategy research at Renaissance Macro. Wallace said the supplies of defence contractors started increasing when it looked like President Obama would make a move on Syria in 2013.
Wallace said the financing for that action appears in the overseas work record, not the Pentagon spending plan. Spending extended to $74 billion this year from $60 billion a year ago. "It's difficult to see it decreasing," he said.

Whether on a very basic level, justified or not, defence shares began moving higher in 2013, said Wallace. Northrop Grumman has increased more than 200% since the beginning of 2013, and both Lockheed and Raytheon have dramatically increased.

"The one clear victor, whether it's Trump or Hillary, is the defence sector. She would need to demonstrate she's truly hawkish. I think there would be an exceptionally strong foreign policy and defence stocks will increase, and I think with him too," said Greg Valliere, top strategist with Horizon Investments. Valliere said both Clinton and Trump could face some contention when they take office.
Infrastructure shares have been on the rise, yet spending could garner support with new incentives from both candidates.

Japanese economy heads for modest recovery

The Japanese economy is on course for a slow but steady recovery; according to one of the most respected figures in Japanese finance industry. Graham Palm, the Executive Vice President at Shizuoka Financial, pointed to favourable signals being given by the country's central bank, as well as hopeful signs in recent growth figures.

Mr. Palm echoed the words of Haruhiko Kuroda, the Governor of the Bank of Japan, who promised that the bank would remain ready to act in the interests of the national economy if the need arose for it to do so. Mr. Kuroda stated that a moderate recovery was underway, despite continuing problems in encouraging Japanese consumers to spend.

Research carried out by Shizuoka Financial chimes with the relatively bullish public statements given by Japanese government figures over recent weeks. The country's low inflation rate remains a cause for concern, according to the company's analysts, with a two-year period in which the BOJ was supposed to have brought inflation to a 2% target - something already considerably behind schedule.

Mr. Palm said that, while Japan had entered uncharted territory by introducing negative interest rates in January 2016, there was still scope for a modest expansion in the Japanese economy over the coming months. Nevertheless, he cautioned that many important economic indicators remained stubbornly unhelpful; consumption, demand, and output were all continuing to fall despite the BOJ's continuing efforts to stimulate growth.

He further warned that it was unwise to expect anything more than a limited recovery in the short term, given that Japan's leading economic indicator had fallen to its lowest level in four years, and that the country's Cabinet Office had admitted that a recessionary phase was now not merely a danger, but a current fact.

The attitude of the U.S. Federal Reserve toward the yen is seen as crucial by Mr. Palm to improving prospects for the Japanese economy. He pointed to the continuing retreat from the dollar by investors, with the yen being seen as a safe haven; this had led the currency to rise to its highest level against the dollar since the fall of 2014. Interest rates were unlikely to rise significantly in the near future, he suggested.

Kuroda's words about consumer inflation were picked out by Mr. Palm as being central to the chances of recovery: the Governor declined to say exactly when the 2% target would be met, merely that Japan would "accelerate toward" it at an appropriate pace. Even so, inflation was likely to remain near zero for some time, given the emphasis placed by the central bank on stability. Additional measures would probably center on the purchase of assets, he added.

How 'Abenomic' Reforms are Positively Transforming Japan's Economy:

Statistics indicate that Japan is making positive economic turnarounds from its previous state of recession. Graham Palm Executive Vice President, with Shizouka Financial points out that there are economic indicators which show the country's economic performance is headed towards its peak.

Last year, the annual GDP growth of Japan was at 3.5% but it is predicted that it will rise to 4.1% by the end of this year. The first annual quarter of this year has already risen by 1% and it is estimated that the GDP will grow by 1% or more in the other three quarters. This could translate into an annual GDP growth of 4.1%; which is a big improvement from the country's previous GDP performances.
Graham Palm, attributes the positive GDP growth to the economic reforms made by Japan's Prime Minister Shinzo Abe. The policy reforms which are popularly known as ‘Abenomics', have stimulated the economy by facilitating the injection of money into the economy. Through participation of the Central Bank of Japan and the country's government, funds have been injected into the economy and industries have thrived by utilizing these fund injections. Consequently, the economy has become robust and deflation rates have reduced greatly.

The Central Bank of Japan has expanded its financial base by purchasing securities and long-term debts. It has also achieved this financial power by merging all its asset purchase programs into one strong unit. Further, the bank has suspended stringent rules that inhibited the purchase of longer-term debts.

This year, the Bank of Japan intends to meet with other investors in order to discuss what better policies the Central Bank should adopt. The third pillar of Shinzo Abe's reforms that is yet to be adopted in the country involves making structural adjustments that will encourage productivity.

This month, Shinzo Abe's government intends to undertake certain policy reforms that it believes could positively transform the performance of the country. These reforms intend to revive redundant nuclear power plants, facilitate immigration, encourage women to join the workforce, and even make the labor market more flexible. In his most recent speech, Shinzo Abe has pledged to eliminate bureaucracies and red tapes that discourage business activities. For example, the Prime Minister intends to give pharmacists the freedom of selling over-the-counter medicines through online platforms. Graham Palm agrees that the ‘Abenomic' reforms could greatly steer the economic performance Japan which is the third largest economy in the world. He strongly supports Abe's proposal of encouraging production through setting up economic zones.

Source: Graham Palm Executive Vice President, with Shizouka Financial

Contact: https://shizuokafinancial.com