Zeev and Thread,
Talk about liquidity! I'm not sure how accurate the following is, but if accurate, then this is a strong case for the continuation of the bull market after the "mini-meltdown" in the Fall. Some really amazing numbers in this article.
Can anyone find any other articles about the December lifting of bans. I'm guessing it's related to the "Big Bang."
MikeM(From Florida)
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JAPANESE COULD SHIFT $1 TLN INTO FOREIGN SECURITIES FROM DECEMBER
By Phillip Day
HONG KONG (MktNews) - Japanese investors are likely to invest overseas a significant portion of their 1,200 trillion yen ($9 trillion) savings once restrictions are lifted in December, analysts say. That's likely to mean hundreds of billions, or even trillions, of dollars moving into foreign markets, particularly the U.S. Treasuries market.
Conservative estimates see Japanese savers allocating 5-10% of their assets overseas. That would amount to flows worth $450 billion to $900 billion at today's exchange rates. The government itself estimates 3-4% of Japanese savings will be invested overseas after the reforms. Other estimates go as high as 15% of Japanese savings, or $1.2 trillion, being invested in foreign assets after Phase II of the Japanese "Big Bang" reforms kick in come December.
The effect on exchange rates and the U.S. Treasuries market will be enormous, according to some analysts. "From discussions with our institutional clients in Japan, our survey shows that we should expect approximately 15% of (savings) to be diversified out of yen primarily into U.S. government fixed income," Princeton Economics Institute economist Martin Armstrong says in a recent report. He estimates that $1 trillion of that could be invested in U.S. Treasuries, creating a "massive" effect on U.S. interest rates.
Armstrong says that would mean Japanese investors would hold a quarter of the U.S. domestic Treasuries market, since some $2 billion of the $6 billion in outstanding government debt is already held by non-U.S. investors. The effect of such huge flows out of Japan would also hit dollar-yen, with some seeing Y200-Y220 in reach by the end of next year. As those flows drive the yen down, foreign assets will become even more attractive to those holding such domestic instruments such as Japanese government bonds, which now return a yield of just over 1%. |
