June 30, 2009

Industrial Output Rises 5.9% In May

Japanese industrial production in May increased 5.9% from the previous month the Ministry of Economy, Trade and Industry reported on Monday. This is the third straight positive figure. The rise in output was led by the automobile, electronics, and iron and steel sectors but almost all sectors saw increases. Production fell only in the pulp, paper and textile sectors.

Now the question is, "is it sustainable or not?" Manufacturers said that they expected output to increase 3.1% in June and 0.9% in July, implying that it may run out of steam.

June 29, 2009

Japan Public Pensions Posted Record Loss in FY08

According to Nikkei, the investment return on public pensions show about a minus 10% in fiscal year 2008. This is a record loss on a fiscal year basis, wiping out all profits made in the last 8 years. Public pension manage about $1.5 trillion. Corporate pension funds also show about a minus 17%, which is worse than public ones, for they invested in more equities. The Welfare Ministry has set a 4.1% annual return over the long term. If return falls short, the government will have to reconsider steps such as hiking premiums.

June 26, 2009

J Will to Sponsor Bankrupt Condo. Developer

J Will Partners, a investment fund, plans to sponsor Morimoto Co Ltd., a bankrupt condominium developer, by injecting about $3 million in capital. Morimoto Co Ltd. filed for bankruptcy last November with roughly $1.68 billion in liabilities. The Development Bank of Japan is providing $30 million in debtor-in-posession financing. J Will Partners is one of a few investment funds with expertise in turnaround as well as real estate.

As the real estate market has stabilized in accordance with the equity market, some aggressive players have started to bottom-fish in the property market.

June 25, 2009

3 Bidders Left for Nikko Asset

According to Nikkei, Citigroup has cut its list of candidates to Sumitomo Trust & Banking Co., T&D Holdings Inc and Bank of New York Mellon Corp. By acquiring Japan's third-largest fund manager with about $90 billion in AUM, Bank of New York Mellon hopes to boost its presence in the Japanese financial industry. Both Sumitomo T&B, one of Japan's leading trust bank, and T&D, a listed insurance company are eager to beef up their asset management business. The bidding process has reached its most crucial part.

June 24, 2009

Itochu, Possible Buyer For am/pm

According to Nikkei, Itochu Corp, one of the largest trading companies, started to negotiate with Rex Holdings Co., the parent company of am/pm Japan Co., about the merger of the battered convenience store operator. Lawson, the second largest operator, once reached a basic agreement with Rex Holding Co., but it turned out to be a deadlock after the US parent company of am/pm showed its firm intention of making existing stores use the am/pm trademark. Itochu, who holds a 30% stake in FamilyMart Co., the third largest convenience chain store operator, looks forward to combining the two operators.

In Japan, Seven-Eleven Japan Co. is a dominant player with about 12,000 stores. Lawson follows with 8,600 stores. FamilyMart has 7,400 while am/pm has 1,100. There are a few other players in the field. We will see industry reorganization since the domestic market is considered saturated.

June 23, 2009

3 Investment Funds To Sell Ex-Kanebo

According to Nikkei, Advantage Partners LLP, MKS Partners and Unison Capital Inc. reached a basic agreement with Hoyu Co., a Nagoya-based hair-dye maker, that they would sell a 60% stake of Kracie Holdings (Ex-Kanebo), a manufacturer of consumer goods for about 25 billion yen (including its debt of 15 billion yen). Although Kracie has recovered well with the help of those funds, it needs a strategic partner to enter into its next growth stage. Hoyu Co. intends to expand its business from hair product lines to general household items. This club deal took place in January, 2006 and the company is expected to exit in a few years.

June 22, 2009

Nomura Securities To Create Corp Turnaround Section

According to Nikkei, Nomura Securities Co. will next month establish a new department dedicated to corporate turnaround business, foreseeing further growth in demand for services against the economic downturn. The new section will focus on financial advisory services for ailing companies, helping such clients draw up turnaround plans and raise the funds necessary to restore their operations. It will also provide advice on merger and acquisition deals, debt reduction and asset sales.

The securities industry has paid attention to the Nikko deal and to the Nikkei. Since the Nikkei has stabilized around 10,000 yen, the securities houses can afford to start some new business.

June 20, 2009

Aderans To End Takeover Defense Measures

Aderans Holding Co. said that its board has decided to scrap its takeover defense measures, per the wishes of leading shareholder Steel Partners. The defensive measures were adopted in 2006 in a battle with Steel Parntners. But since Steel Partners successfully replaced the struggling wigmaker's board over the Unison group at this May's general shareholders meeting, those measures lost their meaning.

June 18, 2009

Gov't Says Economy Still Harsh But Some Recovery

The Cabinet Office released the monthly economic report (May) yesterday. It says in summary: under deteriorating employment conditions, the Japanese economy is still in a difficult situation. But with inventory adjustment proceeding, stimulus packages and economic conditions overseas picking up, we expect the Japanese economy to hopefully be in the process of recovery. On the other hand, production activity remaining at a low level will make the unemployment rate worse for a while. In addition, we still have concerns regarding the effect of the financial crisis and the direction of the world economy.

The tone of their view was much better than last month.

June 17, 2009

Daiwa Securities to Buy Davinci REIT manager

According to Nikkei, Daiwa Securities Group Inc, Japan's secound-largest broker, will buy a real estate management unit of KK DaVinci Holdings to expand its property business. Daiwa will also take roughly 13% of DA Office Investment through a private placement of new shares. Daiwa Securities has been looking for an opportunity to invest in the real estate market as a new business field.

June 16, 2009

Five in Running to Acquire Nikko Asset

Five companies are in the running to acquire Citigroup Inc.'s Nikko Asset Management unit, according to Nikkei. They are Sumitomo Mitsui Financial Group Inc., Sumitomo Trust & Banking Co., Mizuho Financial Froup Inc., Nomura Holdings Inc. and T&D Holdings Inc., who have reached the second round for bidding for Nikko Asset. Nikko Asset boasted some 9 trillion yen in asset under management at the end of March. Some of them likely offered more than 100 billion yen ($1 billion) for it.

June 15, 2009

SBI To Launch Investment fund With Malaysia State Fund

SBI Holdings Inc., one of the top Japanese venture firms, said that it will launch an investment fund jointly with Malaysian state-run fund management company Permodalan Nasional Berhad (PNB). The new entity will invest in firms in China, India and ASEAN countries with capital of $50 million. So far SBI has teamed up with a variety of Asian investment groups like KTIC Holdings (Korea), Temasek Holdings (Singapore), and State Bank of India etc.

June 12, 2009

10-year JGB Hits 8-Month High 1.56%

Japanese government bond yields rose Thursday, with the key 10-year yield hitting 1.56%, the highest since October, after US Treasury yields rose overnight. On the same day the Nikkei briefly touched the psychologically important 10,000 level. Although the yield on 20-year bonds rose 2 basis points to 2.19% and the 30-year yield rose 2.5 basis points to 2.31%, the shorter end held steady; the 2-year bond yield was 0.37% down by 0.5 basis points and the 5-year bond yield was flat at 0.845%. The 5-year auction whose bid-to-cover ratio was 3.09 times, the highest since January. We see good demand for shorter bonds, less for longer.

June 11, 2009

Japanese Machinery Orders Drops 5.4%

The Cabinet Office reported yesterday that core Japanese machinery orders fell by 5.4% in April. This is much weaker than the market consensus of a 0.4% rise.

The Bank of Japan reported that the country's wholesale price index, as measured by the corporate goods price index, slipped 5.4% in May from a drop of 4% in the same period a year earlier. This is due to cheaper commodities prices and a slump in corporate activity.

Those figures are not showing any turnaround of the economy yet, but economists maintain their view that the economy appears to be over the worst.

June 10, 2009

Mitsubishi Co Sets Up Reinsurance Investment Fund

Mitsubishi Corp. has established an insurance and investment manager, Pentelia Diamond Capital Management Ltd with Pentelia Capital Management, a leader in the management of insurance linked assets. The company has successfully launched Eolia Diamond Ltd with a total commitment of $132 million. Eolia Diamond Ltd. is an alternative investment fund designed to participate abroad in array of insurance-linked assets such as catastrophe bonds, natural catastrophe property reinsurance, mortality assets, terrorism and aviation reinsurance.

Since this kind of fund could raise more than 100 million, this might be a symptom of Japanese institutional investors coming back.

June 09, 2009

Restaurants Chains Beef Up Business in Asia

Japanese restaurants chains whose domestic sales have hit the ceiling, turn their eyes to booming markets in Asia. Yoshinoya Holdings Co., will open 50 beef bowl shops in China. Saizeria, a casual Italian restaurant operator, plans to double the numbers of shops in Asia. Watami Co., a pub operator will open around 10 Japanese styled restaurants in Taiwan and Hong Kong.

Domestic-oriented companies like restaurants chains will expand their operations in Asia.

June 08, 2009

Nikkei Index Hit 8 Month High on Weak Yen

Japan's Nikkei average hit its highest point in eight months on Monday as a weaker yen raised prospects for exporters and the global economic outlook was buoyed by fewer-than-expected US job cuts in May.

Market players said the Nikkei could soon reach the psychological 10,000 yen mark with this momentum going. It is a good surprise since Nikkei has recovered about 40 % since its bottom in March.

June 05, 2009

Eco-Car Battles Shift Gear

Toyota Motor Corp's Prius hybrid took the top spot in the May ranking of new car sales and Honda's Insight hybrid took third, according to data released by the Japan Automobile Dealers Association.

Mitsubishi Motors Corp began producing the iMiEV at its main plant in Okayama Prefecture, becoming the world's first carmaker to mass-produce a practical electric vehicle for general consumers. Fuji Heavy Industries Ltd will begin deliveries in Japan of its newly-developed electric car from late July. Nissan Motor Co. also aims to release an electric-powered vehicle in 2010.

With government incentives, tax breaks and consumers' predilection for fuel-efficent vehicles, Japanese car-makers are now in the middle of an eco-friendly race.

June 04, 2009

Japanese Firms Earned Record 36% of Profit From Asia ex Japan

According to Nikkei, listed companies generated a record 36% of their combined operating profit in Asia excluding Japan in the fiscal year ended March 31, up 24 points, this shows a sign of Japan's growing reliance on neighboring markets.

The survey covered 432 companies that disclose group sales and operating profits figures for each region. Domestic operations accounted for 48% of overall operating profits, a drop of about 18%. The companies reported 10-20% decline in sales for all regions due to the global economic downturn. Operating profits plunged 82% in Japan, 96% in Europe and it was red in the US. Meanwhile, operating profits in Asia outside Japan dipped just 28%. Consumption has been relatively solid in emerging Asian markets. Many companies believe that Asia will remain strong and that efforts in this region will affect long-term growth.

June 03, 2009

Confidence Rises 4th Straight Month at SMEs

The diffusion index of business sentiment at 1,000 small and midsize companies rose 3.3 points to 34.1 in May, according to data released last Wednesday by Shoko Chukin Bank, a government affiliated bank that provides loans to smaller firms. Even though the index has continued to improve from January's record low of 24.8, the May result still fell below the threshold of 50 for the 26th consecutive month. A number above 50 indicates that business conditions are positive, while a reading below 50 suggests they are negative.

June 02, 2009

Industrial Production Surges 5.2% in April

The Ministry of Economy, Trade and Industry reported last Friday that industrial production in April increased 5.2% from the previous month, this was bigger than the consensus of 3.3%. It was the second straight month of growth. The ministry predicts the industrial production figure is likely to rise 8.8% in May and 2.7% in June and it revised its overall assessment of the category from "remaining stagnant" in March to "signs of recovery can be seen".

This 5.2% month on month rise in April is the highest in 56 years. The sharp recovery also suggests how rapidly the Japanese economy nosedived in the previous months. We are seeing good improvements in car and electronics sectors, while consumer demand remains weak.

June 01, 2009

Joint Files For Bankruptcy Protection

Japanese apartment developer Joint Corp filed for bankruptcy protection with about a $1.5 billion debt. Joint, which received a capital infusion from Orix Corp last year, seemed to have weathered the sluggish state of the property market.

Before the announcement, shares of Joint were traded at around 215 yen. It was a surprise to players of both equity and real estate markets.