J- Vid of Interest: Jesper Koll (2)

Another great presentation by Jesper Koll about the state of Japan's economy.

Key Points Made:

• Back being the last optimist in Japan. Investing in Japan has gone full circle

• Negative interest rates hurting Japanese Banks, but Mr. and Mrs. Watanabe are benefiting

• In terms of NGDP we are where we were 1995

• Empirical evidence that Japan is on the verge creating a new bank credit cycle

• Big beneficiaries not industrial conglomerates of Japan, but private household. Mortgage refinancing is picking up

• Profit from Japanese Banks transferred to Japanese households

• Why should you invest in Japan? What is the best thing about Japan? It is R&D spending in Japan! There was never a lost decade in R&D spending in Japan

• Japan is bad at marketing their products, nevertheless highly innovative

• Japan is cheap, because of deflation in Japan vs. inflation in the ROW. Japan priced back in into competitiveness

• From a stock market investment perspective Japan has fundamentally changed. Used to be an insider club. Governments was dominated by cross shareholders. Made up 50% of Market cap. Today cross ownership down to less than 10%. Japan is now open

• Foreigners, owning 30% of Market cap,  getting an increasing voice in corporate Japan

• Biggest Risk to Japan? Recession in the USA

• What is different in Japan today? Social Forces: Japan has a rival (China)/ Regime certainty: Abe will be in power for at least 3 years. Japan today the most pro- business government in the developed world

• Japan is now a deficit country. Normal in an aging country. It's the engine that drives corporate governance. Dividend and share buybacks highest in any industrial country. Driver is economic of scarcity. Japan is running out of (internal) funds

• Employment in Japan is growing

• Positive Demographics: Japan will be the only advanced Economy with a rise in the middle class

• Last year 98% of university graduates in Japan were offered a full time job within 10 day; Japan is in a demographic sweet spot, because of scarcity of workers

• Japanese households incredibly rich. 45% of Japanese have no debt and own the home they are living

• Real reason for deflation is lack of productivity growth ==> no incentive to invest ==> incentive to hoard cash

• Lack of Abenomics: lack of deregulation and support of Zombie companies

• In two year BOJ will own 50% of Japanese Debt; will than restructure debt

• Foreign ownership of Japanese Debt now 20% of free float

• Dependency of foreign capital is going up, irrespectively of money printing of BOJ ==> structurally Yen is going to be weak