Financial Times (March 22)
Many hope that negative interest rates will “encourage banks to lend more plentifully and cheaply and help support economic recovery.” This might instead prove “a dangerous experiment with diminishing positive impact.” The optimistic forecasts overlook “how financial intermediaries may actually respond.” Negative rates “erode banks’ margins. They give lenders an incentive to shrink, not grow. They encourage banks to seek out opportunities overseas rather than in their home markets. They also risk disruptions to bank funding. All go against the grain of the central banks’ desire to ease credit conditions and support financial stability.”
Tags: Banks, Credit, Dangerous, Diminishing positive impact, Economic recovery, Experiment, Financial stability, Intermediaries, Lending, Margins, Negative interest rates, Overseas
Bloomberg (August 10)
The Bank of Japan has refrained from additional monetary stimulus; an apparent acknowledgement that “pumping more money into the economy won’t end Japan’s deflation. Falling prices are as much about the aging population as anything else, and only structural change can arrest the trend.” Fortunately, the economy might just be driven by “a new breed of Japanese companies going overseas as the domestic market shrinks.”
Tags: Aging population, BOJ, Deflation, Economy, Japan, Market, Monetary stimulus, Overseas, Prices, Structural change
Financial Times (January 14, 2014)
“One trend that is prompting parts of Japan Inc to shop abroad is the ageing population. Japanese banks and insurers, for example, are increasingly looking to the younger demographics of southeast Asia to build up their next generation of depositors and policy holders.” And while this was part of the rationale behind Suntory’s acquisition of Beam, a new overseas M&A boom is unlikely given the weak yen, especially as many “companies remain unwilling to borrow for expansion after years of cutting costs and hoarding cash.”
Tags: Acquisition, Ageing, Banks, Beam, Cutting costs, Demographics, Depositors, Expansion, Hoarding cash, Insurers, Japan, M&A boom, Overseas, Policy holders, Population, Southeast Asia, Suntory, Yen
Wall Street Journal (May 30)
“Flush with cash and bolstered by a strong currency, Japanese companies are in the midst of the biggest boom in overseas investment the country has ever seen.” At home, earnings are threatened by the shrinking domestic market, uncertain electric supply, disrupted supply chains, and weak domestic economy. In the past, “Japanese mergers-and-acquisitions booms sometimes focused on trophy properties with little regard to value.” Today’s boom is driven by value and “powered by fear.”
“Flush with cash and bolstered by a strong currency, Japanese companies are in the midst of the biggest boom in overseas investment the country has ever seen.” At home, earnings are threatened by the shrinking domestic market, uncertain electric supply, disrupted supply chains, and weak domestic economy. In the past, “Japanese mergers-and-acquisitions booms sometimes focused on trophy properties with little regard to value.” Today’s boom is driven by value and “powered by fear.”
The Economist (December 17)
“Japanese firms spent a record $80 billion on some 620 foreign companies in 2011…, exceeding the previous record of 466 deals worth $75 billion in 2008.” This major shopping spree is different. Corporate Japan’s acquisitions of the 1980s showed strength. “This time, it is a symptom of weakness.” Multiple calamities made 2011 “wretched” for Japan and, due to long-term demographics, “Japanese firms find it nearly impossible to expand domestically.”
Tags: 2011, Calamities, Demographics, Japan, M&A, Overseas
