Saturday, September 21, 2013

Japanese Companies Are Quietly Protecting Themselves

... by getting some of their money out of the country.

A while back I posted links to some alarming commentary about Japan from hedge fund manager Kyle Bass. His takeaway: if you're invested in Japan, get out now. It turns out Japanese companies are doing just that. They're not in an economic boom, so they're not flush with profits, but thanks to the Bank of Japan printing money like mad and making it available and insanely low interest rates, they've got money to spend. They're spending it overseas.

Real estate in Viet Nam.
Japan currently tops the list of 47 countries and territories investing in Viet Nam’s real estate. According to statistics from the Ministry of Planning and Investment, Viet Nam attracted a total of US$12.63 billion of FDI in the first eight months of this year, a rise of 19.5 per cent over the same period last year.
Assorted businesses in Thailand.
Incoming non-portfolio investment reached Bt278.6 billion in the first half of this year, with Japanese projects accounting for 54 per cent of all foreign-owned projects and 66 per cent of foreign direct investment (FDI).
Despite having a trade deficit, they're on a record pace for investment outflows.
“In fact, Japanese FDI recorded its biggest monthly outflows from Japan ever in July (JPY3734bn or USD37bn)”.

“If Japanese firms keep investing outside Japan at the current pace, FDI outflows this year could exceed the previous record amount in 2008 (JPY13.2trn)”.

“While FDI is expected to remain elevated, the Japanese trade deficit is estimated to have widened in August”.
They're bringing their money to the US as well.
Softbank Corp. (TYO: 9984), the Japanese mobile network operator, is in the process of completing its acquisition of Sprint Nextel Corporation (NYSE: S). Earlier this week, Dish Network Corp. (Nasdaq: DISH) dropped out of the fight for the third-biggest U.S. wireless carrier and Softbank now hopes the deal will clear its final hurdles by the beginning of July. Once completed, it’ll mark the largest Japanese acquisition of a U.S. company in more than 30 years.
This would make perfect sense and be a sign of stability if Japan was experiencing tremendous growth and was seeing wild inflation in asset prices at home, but they're not. They've had deflation for quite some time now and their economy has been stagnant for nearly 20 years. To me, this looks like the smart money is getting out while it still can.

1 comment:

Doo Doo Econ said...

Love the lead in title!