This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Japanese Earnings Season: A Referendum On Abenomics?

James Dennin, Kapitall: Recently we wrote an article about Abenomics, the rationale behind Japanese Prime Minister Shinzo Abe's plan to reduce deflation and re-boot the long-stagnating Japanese economy. As most analysts were predicting, Abe's Liberal Democratic Party (LDP) won parliamentary elections in a landslide, indicating that the country is happy with the progress of his restorative initiatives.

[Read more from Kapitall: Earnings Update: 3 Healthcare Giants​]

However, an even more important referendum on Mr. Abe is set to transpire this week with the release of some of Japan's most important companies' Q2 earnings. Many important bellwethers of the Japanese economy, including the strength of its major automobile and electronics manufacturers, are expected to shed light on whether the Prime Minister's reforms have had a positive effect.  

Abe's program – a combination of inflation, public spending, and other measures designed to boost investment – came at a moment when Japan's growth was stalled, and GDP had sunk to its lowest rate since 1991. To make matters worse, when China passed Japan to become the world's second largest economy, many Nationalists began to worry that Japan's increasingly fragile economic state would jeopardize its ability to defend itself. Early indicators thus far have been good: consumer spending, the stock-market, and Abe's approval rating have all shot up.

Yet many are concerned about the nation's debt, which at 220% of GDP represents one of the highest government debt levels among the world's advanced economies. Some bears are even worried that measures put in place to galvanize the economy will in practice end up ruining it. 

Most of Japanese debt is borrowed from within the Japanese economy. This makes it far less risky than countries that borrow from other countries, such as Greece. However the Bank of Japan (BOJ) is also striving to hit 2% inflation targets, as a way to boost exports and make it easier to finance the country's debt. As some investors have pointed out, this could create a "rational investor paradox" wherein owners of BOJ bonds will be compelled to sell if the bank's measures prove successful because their bonds will become less valuable.

If growth is not strong, Abe is expected to delay an upcoming decision about raising the country's sales tax. Not simply an important step in lowering his nation's debt, Abe's resolve about the tax-hike is seen by many as an indicator of confidence in the Abe program as a whole. 

Toyota (TM), Honda (HMC), Sony (SNE), Panasonic (PC) are all releasing their earnings this week. Will they affirm or disprove optimism about Japan's growth? Use this list as a starting point for your own analysis.

The List

Analyze These Ideas: Access a performance overview for all stocks in the list.

 

Do you see investment opportunities in these Japanese companies? Use this list as a starting point for your own analysis.

1. Toyota Motor Corporation ( TM): Engages in the design, manufacture, assembly, and sale of passenger cars, minivans, and commercial vehicles. Market cap at $190.43B, most recent closing price at $120.25.

 

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs