Is the Growth Sustainable?

The Japanese markets saw slight gains across the board today. High oil price and low metals have pulled stock market and yen in different directions, and Nikkei has reached equilibrium gaining 0.08%. The yen saw slow recovery as the US 10 year yield dipped by 2.9 basis points to 5.1420%. The economy has been doing well, recently, but economists expect that the growth will slow down in the recent future and the inflation pressure will be minimal, if any. Based on this data and a recommendation by a major investment bank, the 10-yr yield surged up.

IN THE MARKETPLACE / Strong GDP growth likely to slow in 2nd quarter - while the Japanese economy had a very strong quarter, expanding at an annualized rate of 3.3%, it is predicted to fall in the second quarter. The slowdown of the US GDP and hence the demand for Japanese goods and absence of positive shocks that helped the first quarter (warm winter, railroad upgrades). [I]Source: The Yomuri Shimbun
Nikko Cordial to Stop Disclosing Salaries - Nikko Cordial Corp., nation?s third largest securities house, now subsidiary of Citigroup Inc., will stop disclosing salaries of its executives. This decision came in response to the recent accounting scandal that wiped out company?s top management. Disclosure of individual compensation packages is not customary in Japan, and Nikko has been one of the pioneers of this practice that prevails in Europe and the US to attract foreign investment. This move is viewed by some analysts as a step into the past and away from the contemporary superior practices of corporate governance. [I]Source: The Asahi Shimbun[/I].
The Asahi Shimbun
Muto Is Favorite to Replace Fukui as BOJ Governor - Bank of Japan Deputy Governor Toshiro Muto is named the most likely successor to Toshihiko Fukui, whose five year term ends next March, by all 15 economists surveyed by Bloomberg News. He is likely to continue Fukui?s policy of gradually raising the interest rates as the economy expands; the only difference with the present governor would be the way he would communicate with investors. [I]Source: Bloomberg[/I].

NURSING CARE: Watami gives offer to Goodwill Group - Watami Co., a chain operator of senior citizens homes released its plans to acquire Goodwill Group Inc., nursing-care operations. The company will dispatch care workers into its present network of senior citizens homes to gain competitive edge on its rival, Nichii Gakkan Co. [I]Source: The Asahi Shimbun.
[/I]The Asahi Shimbun
Japanese yen saw no market moving news yesterday. The retail sales improved slightly, Tokyo Department Store sales printing a positive 0.7% as opposed to the previous figure of -1.5%, while National was -0.4% contrasting prior of -1.3%. Another large mover for the pair was the falling US yields.

High oil prices (barrel of crude trading at $68.92 yesterday) have put downward pressure on Japanese industry as the country satisfies its needs for oil almost exclusively with imports. However, given yesterday strong performance, the shock was not disastrous for Nikkei. The index closed 14.1 points higher than it opened at 18163.6. A pharmaceutical giant Daiichi Sankyo was one of the leaders gaining 4.35%. The falling metal prices had mixed effect on metal industry, boosting prices of Sumitomo Metal, Kobe Steel and Kawasaki Metal, but hurting Nippon Steel and Mitsubishi Heavy Industries.

As the economic growth in Japan was anticipated not to be substantial in the long term and not sufficient to spur inflation, a major investment bank advised investors to buy Japanese 10-yr bond. Consequently, the 10yr saw a healthy yield growth to 1.930% up by 0.031% from yesterday.