Appendix - Foreign Press Center Japan · Copyright © 2016 Daiwa Institute of Research Ltd. All...
Transcript of Appendix - Foreign Press Center Japan · Copyright © 2016 Daiwa Institute of Research Ltd. All...
AppendixEnglish Only(英語のみ)
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.1
Political Schedule
Japan US Europe/China and Others
2016 May G7 summit
June "Brexit" referendum
Jul Upper house election
Nov Presidential election
Dec Congress to ratify TPP?
2017 DecXi Jinping administration
established for second term?
2018 FebEnd of term for FRB Chair Janet
Yellen
AprEnd of term for BOJ governor
Haruhiko Kuroda
SepElection of LDP president
(Shinzo Abe steps down)
Nov Mid-term elections
DecEnd of term for upper house
representatives
2019 Oct Sales tax to be hiked again?End of term for ECB president
Mario Draghi
Key political events
Source: Various materials; compiled by DIR.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 2
Before inauguration
of Abe
Administration
Current indicators Note
Corporate earnings
(Ordinary profit)12.4 trillion yen(Oct.-Dec. 2012)
17.9 trillion yen(Jul.-Sep. 2015)
Record high
Wage hike(announced by Rengo, Japanese
Trade Union Confederation)
0.82% (2012)
2.2% (2015)
Highest level in 17
years
Employment
Situation
Number of
employees
62.8 million(Oct.- Dec. 2012)
64.0 million(Oct.-Dec. 2015)
Increased by
more than 1.1 million
Unemployment
Rate
4.1%(Nov. 2012)
3.3%(Dec. 2015)
Lower 3% range,
lowest in 18 years
Active Job
Openings-to-
Application Ratio
0.82(Nov. 2012)
1.27 (Dec. 2015)
Highest level in 24
years
Nominal GDP472.7 trillion yen(Oct.-Dec. 2012)
499.4 trillion yen (Oct.-Dec. 2015)
Recovering to the level
before the global
financial crisis in 2008.
Nikkei Stock Average8,665 yen
(Nov. 14, 2012)
16,052 yen (Feb. 23, 2016)
Highest level in 19
years(Average between Jan.- Dec.
2015: 19,213 yen)
Trends in major economic indicators
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The new three arrows of Abenomics
Growth strategy
Redistribution policy
(1) A robust economy that gives rise to hope
(2) Dream-weaving childcare support
(3) Social security that provides reassurance
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 4
y = -778.14x + 48239R² = 0.5232
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
05101520253035
(2012 Real GDP Per Person, Purchasing Power Parity Basis)
(In Order of Gender Equality Index, 2014 Survey)
US
Women's Empowerment →
Japan
Czech Republic
Turkey
UK
Netherlands
Sweden
Switzerland
Denmark
Norway
Finland
France
Hungary
Italy
Iceland
Korea
Germany
Source: World Economic Forum and OECD; compiled by DIR.
Gender Equality and Real GDP Per Person in OECD Member Nations (Purchasing Power Parity Basis)
“Active involvement of women” is the key
to reviving Japan’s economy
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Japan: Effects of Negative Interest
Source: Compiled by DIR.
Financial Markets
Turmoil in globalfinancial markets
Real Economy
Negative Interest Rate Introduced
Economicstagnation
Yen appreciation
Yield on govt. bonds declines
Downward pressureon prices
Corporations Households
Interest on bank deposits declines
Interest income declinesConfidence worsens
+Housing investment & consumption stagnate
Interest on loans declines
capex stagnates
Cost of procuring funds
decreases
Interest on housing loans
declinesNegative wealth effect
International interestspread increases
Sluggish growth in wages
Import pricesfall
<
Stock prices fall
<
Possible Negative Effects on Economy & Prices due to Negative Interest Rate
Price of Crude Oil Rises
Upwardpressureon prices
decreases
Cost of procuringfunds decreases
Demand for capital declines
①
②
③
Corporate business performance:
Expections of improvementsubside
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
Domar’s condition: Nominal GDP growth rate>long-term interest rate
Is fiscal adjustment possible if there is economic
growth?
0
1
2
3
4
5
6
7
8
-15
-10
-5
0
5
10
15
20
25
66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
(%)(%; % pt)
(a - b; left)
General government interest payments (% of GDP; right)
(b) Long-term interest rate (left)
(a) Nominal GDP growth (left) 1971-2010 1981-2010 1991-2010 2001-2010
Avg. of
(a - b)0.20 -1.15 -1.58 -1.50
Probability
of (a > b)38.6 23.5 16.7 21.4
Japan:Nominal GDP, Long-term Interest Rate, Interest Payments
Source:Cabinet Office, IMF; compiled by DIR.
Note:General government interest payments:FY basis; other:CY basis.
0
10
20
30
40
50
60
70
80
90
100
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
(%)
(CY)
Financial deregulation(higher inflation)
US IT bubble
US housing bubble
Note: OECD, IMF; compiled by DIR.Note: Major OECD nations are 16 nations for which interest rate (in terms of 10-yr sovereign bond yields) and nominal GDP growth rate since 1971 are available, namely, Australia, Austria, Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, Luxemburg, Netherlands, Norway, Sweden, UK, and US.
Ratio of Major OECD Nations That Meet Domar's Condition
Growing global
excess liquidity
6
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Growing Social Security Costs Main Cause of deteriorating
Fiscal Balance
7
11.6
(17.5%)
Social security
6.2Local allocation
tax grants 34.1
Other
14.3
Debt servicing
Tax58.0
Other 2.6
Construction bonds 5.6
Social security
30.5(29.2%)
Local allocationtax grants
6.0
Other
36.1
Debt servicing
23.3
Tax50.0
Other 4.6 Construction bonds 6.0
Deficit-financing bonds35.2
Revenue
Revenue
Expenditure
Expenditure
FY90
FY14
+18.9 +2.0 +8.9+29.6
(Y tril)
▲0.2
Comparison of FY90 and FY14 General Government Revenue and Expenditure (Central government)
Source: Ministry of Finance; compiled by DIR.Note: FY90: original budget; FY14: government draft.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
The Shift From Mid-Range Benefits for Low Burden to High
Benefits for Low Burden
8
OECD Nations: National Burden and Social Security (2010)
y = 0.47 x + 1.06 R² = 0.57
0
5
10
15
20
25
30
15 20 25 30 35 40 45 50 55
National burden (% of GDP)
Social security expenditure (General government; % of GDP)
Japan
Greece Sweden
Larger burden
Larger benefit
2010 2010
2010
1980
1995
1993
Source: OECD; compiled by DIR.
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Simulation of Long-Term Interest Rate
5.0
0
1
2
3
4
5
6
7
8
9
10
1980 82 84 86 88 90 92 94 96 98 2000 02 04 06 08 10 12 14
Actual interest rate
Theoretical interest rate
(CY)
Japan’s Theoretical Long-term Interest Rate Implied by Other Nations’ Interest Rate (%)
Source: OECD; compiled by DIR.
Estimating equation for theoretical interest rate:
Long-term interest rate = 1.07 + 0.76 x short-term interest rate + 0.02 x outstanding balance of general government debt (% of nominal GDP) + 0.06 x GDP deflator (y/y).
Estimation period 1981-2013; Significance of coefficients: 5%; Adjusted R2: 0.87; Coefficients derived from estimation results of long-term interest rates of OECD 21
nations (excl. Japan).
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Central/local Government Primary Balance
-7-6-5-4-3-2-10123
19
91-9
5
96
-00
20
01-0
5
06
-10
11
-15
16
-20
21
-25
26
-30
31
-35
36
-40
Radical reform scenario
Structural reform scenario
Base scenario
(FY)
DIR estimate
(% of GDP)
50
100
150
200
250
300
19
95
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
Radical reform scenario
Structural reform scenario
Base scenario
(% of GDP)
(end-FY)
DIR estimate
Outstanding Balance of Central/local Government Debt
Source: Compiled by DIR based on various statistics.
Consumption Tax(1)
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Consumption Tax(2)
Tax Revenue Simulation
-4
-2
0
2
4
6
8
10
12
12 13 14 15 16 17
(Y Tril)
(FY)Consumption Tax Revenue Corporate Tax Revenue
Income Tax Revenue
Amount of divergence from hypothetical case where 2014and 2017 consumption tax hikes do not take place.
Decline in tax revenue due to recession caused by tax increase
Source: Produced by DIRNotes: 1) Simulation results using DIR short-term macro model.
2) FY2017 revenue from consumption tax takes into consideration the amount of decline in tax revenue due to the reduced tax rate.
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
15 16 17
(Y Tril)
(FY)Consumption Tax Revenue Corporate Tax Revenue
Income Tax Revenue
Amount of increase in tax revenue if recession caused by tax increase is avoided.
Amount of divergence from case where 2017 consumption tax increase takes place.
Source: Produced by DIRNotes: 1) Simulation results using DIR short-term macro model.
2) FY2017 revenue from consumption tax takes into consideration the amount of decline in tax revenue due to the reduced tax rate.
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Consumption Tax(3)
-4
-3
-2
-1
0
-28
-25
-22
-19
-16
2017 2018 2019 2020 2021 2022 2023 2024 2025
(Y Tril)
(CY)Amount of Difference (Right Axis)
Tax Increased
Postponed Indefinitely
(Y Tril)
0
6
12
18
24
30
1,250
1,300
1,350
1,400
1,450
1,500
2017 2018 2019 2020 2021 2022 2023 2024 2025
(Y Tril)
(CY)Amount of Difference (Right Axis)
Tax Increased
Postponed Indefinitely
(Y Tril)
S imulation of F iscal Balance (Left: General G overnment F iscal Ba lance, R ight: G eneral Government Debt)
Source: Estimates using DIR Midterm Macro Model. Source: Estimates using DIR Midterm Macro Model.
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Capex(1)
2
4
6
8
10
12
14
16
18
20
90 92 94 96 98 00 02 04 06 08 10 12 14 16
Depreciation Expenses
Cash Flow
Capital Expenditure
Y Tril
(CY)Source: Ministry of Finance; compiled by DIRNotes: 1) Seasonally adjusted f igures for depreciation expenses calculated by DIR.
2) Cash flow = recurring profits / 2 + depreciation expenses.
Capital Investment and Cash F low
0
10
20
30
40
50
60
70
80
90
-6
-4
-2
0
2
4
6
8
10
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Nominal capex (right)
Revision rate to capex projection* (one year previous; left)
(% change from previous survey ) (Y tril)
(CY)
Capex: Actual and Projection
Source: Bank of Japan (BOJ), Cabinet Office; compiled by DIR.*BOJ Tankan survey of corporate sentiment; bold line=4Q MA.
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Capex(2)
-20
-15
-10
-5
0
5
10
15
20
91 93 95 97 99 01 03 05 07 09 11 13 15
(y/y,%)
(CY)
Capacity Increase New products & Product Upgrade
Rationalization & Labor-Saving Research & Development
Maintenance & repair Others
Capex
Source: Development Bank of Japan, compiled by DIR.
Capex Breakdown by Motive of Investment (All Industry)
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Factor Analysis of Corporate Earnings
Capex(3)
85
90
95
100
105
110
115
120
125
130
-3
-2
-1
0
1
2
3
4
5
6
Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ
02 03 04 05
Domestic Output Price Domestic Sales Volume
Export Output Price Export Sales Volume
Variable Expenses Fixed Expenses
Recurring Profits Real Capital Expenditure in Manufacturing Industry (Right Axis)
(Deviation Amount from Reference Point, Y Tril)
(Quarter)
(Year)
(Reference Point=100)(Deviation Amount from Reference Point, Y Tril)
85
90
95
100
105
110
115
120
125
130
-3
-2
-1
0
1
2
3
4
5
6
Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ
12 13 14 15 16
(Quarter)
(Year)
(Reference Point=100)
Source: Ministry of Finance, Bank of Japan; compiled by DIR.
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Correlation Coefficient of Capital Investment and Corporate Earnings Components
Capex(4)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Domestic SalesVolume
Export SalesVolume
Domestic OutputPrice
Export OutputPrice
VariableExpenses
(Reversed Sign)
Fixed Expenses(Reversed Sign)
Volume Price Expenses
Driving Force Until Global Financial Crisis of 2008
Driving Force in Current Economic Recovery Phase
Source: Ministry of Finance, Ministry of Economy, Trade and Industry; compiled by DIR.
Note: Coefficient with the greatest absolute value out of 4-quarter time-difference correlation is displayed.
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Capex(5)
40
50
60
70
80
90
100
110
120
130
140
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
Real Anticipated Growth Rate of Demand (Leads by 3 Qtrs)
Amount of Capital Expenditure/Cash Flow Ratio(Right Axis)
( %)
(CY)
( %)
Source: Ministry of Finance, Cabinet Office; com piled by DIR .
Note: Rea l anticipated g rowth rate of dem and is an a ll-industry figure.
Indicates outlook five-years into the future.
R ea l Anticipated Growth Rate of Demand, and Amount of Capital Expenditure/Cash Flow Ratio
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 18
20
22
24
26
28
30
32
34
36
38
40
40 45 50 55 60 65 70
1990
2000
2015
1984
Percentage of persons stating that the purpose of holding financial assets is to cover living expenses in old age (%)
Savings Rate with Age Factor Removed
Savings Rate
(Sa
ving
s Rate
, %)
2010
19902000
20102015
Source: Ministry of Internal Affairs and Communications, and Bank of Japan; compiled by DIR.Note: Savings rate from household survey “Rate of Surplus”. Aging factor found by estimating savings rate. The forecast formula is as follows: Savings rate = 18.01 – 0.75 x aging rate + 0.16 x anxiety regarding the future +0.01 x household assets (-2). Aging rate and household asset factors have a significance of 1%. Anxiety regarding the future has a significance of 5%. Anxiety regarding the future is the percentage of persons stating that the purpose of holding financial assets is to cover living expenses in old age in reply to surveys regarding the purpose of holding financial assets.
Financial Planning for Old Age and Savings Rate
Consumption(1)
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
Consumption(2)
Employee Compensation Growing, while Personal Consumption
Stagnates
19
245
250
255
260
265
270
275
280
285
290
295
300
305
310
315
320
325
330
05 06 07 08 09 10 11 12 13 14 15 16 (CY)
Real Personal Consumption Real Employee Compensation (Right Axis)
(Y Tril) (Y Tril)
Source: Cabinet Office; Compiled by DIR.
Real Personal Consumption and Real Employee Compensation
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
+4,832
+6,853
+1,193
▲ 3,861
▲ 2,021
▲ 3,267
▲ 688
+2,021+336
+2,442
+1,399
0
2,000
4,000
6,000
8,000
10,000
12,000
Wages& Salaries
Employer's Contribution
to SocialSecurity
Employee Compensation
OperatingSurplus
PropertyIncome (Net)
IncomeTax (Paid)
Employer'sContribution
to SocialSecurity
Employee'sContribution
to SocialSecurity
SocialSecurity
Benefits(Received)
Others DisposableIncome
Source: Cabinet Office; Compiled by DIR.
Factor Analysis of Change in Wages & Salaries, Employee Compensation, and Disposable Income
(FY2012→FY2014)
(Change Between FY2012 and FY2014, Yen Bil)
Consumption(3)
Increase in Social Security Contributions Puts Squeeze on Growth in
Disposable Income
20
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Consumption(4)
10
20
30
40
50
60
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
(Y Tril)
(CY)
Period When Eco-Car Subsidy and Consumer Electronics Eco-Point System Policies were inEffect
Period During which Last-Minute Demand was Generated beofore Sales Tax Hikes
Trend seen prior to introduction of the eco-car subsidy and the consumer electronics eco-point system.
Real Durables Consumption and its Trend
Source: Cabinet Office; com piled by DIR .
96
98
100
102
104
106
108
13/1 13/5 13/9 14/1 14/5 14/9 15/1 15/5 15/9 16/1(Yr/Mo)
Broad-Ranging Personal Services Essential Personal Services
Non-Essential Personal Services
(2013=100)
Trends in Personal Services
Source: Ministry of Economy, Trade and Industry; compiled by DIR.Note: Less retailing.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 22
Consumption(5)
94
95
96
97
98
99
100
101
Ⅰ Ⅱ Ⅲ Ⅳ Ⅴ
(2012=100)
(Five Annual Income Quantiles)
Source: Ministry of General Affairs and Communications; compiled by DIRNote: Seasonal Adjustment by DIR. Thick bold line indicates average of all households.
Personal Consumption by Annua l Income
75
80
85
90
95
100
105
29 a
nd B
elo
w
30-3
9
40-4
9
50-5
9
60-6
9
70 a
nd O
ver
(2012=100)
Source: Ministry of General Affairs and Communications; compiled by DIRNote: Seasonal Adjustment by DIR. Thick bold line indicates average of all households.
Personal Consumption by Age G roup
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Consumption(6)
Consumption Function Estimation Results by Age Group and Income Bracket
Disposable Income
Financial Assets
Anxiety Regarding
the Future
Trend Term
Disposable Income
Financial Assets
Anxiety Regarding
the Future
Source: Produced by DIR.
Notes: 1) The asterisks *, **, *** indicate that the coefficients are statistically different from zero at the 1%, 5%, and 10% levels.
2) The factor of anxiety regarding the future is Japan’s outstanding obligations as a percentage of GDP.
0.46***
Estimation of Consumption Functions by Age Group
Age 29 and
Below 30-39 40-49 50-59 60-69 Age 70 and Over
0.91*** 0.97*** 0.67*** 0.79*** 0.49***
0.11
0.08 -0.04 -0.05 0.16*** 0.11 0.54***
-0.32*** -0.11*** -0.15*** -0.06* 0.00
0.85*** 0.84*** 0.75***
0.00 0.00** 0.00 0.00* 0.00*** 0.00**
Estimation of Consumption Functions by Income Bracket
Low Income Middle Income High Income
0.15*** 0.17*** 0.26***
-0.01 -0.02** -0.07***
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Consumption(7)
0
5
10
15
20
25
30
15-24 25-34 35-44 45-54 55-64 65
(%)
Invo luntary Irregu lar Emp loyee Ratio (2015)
Source: Ministry of Internal Affairs and Communication; compiled by DIRNotes: 1) Number of irregular employees accounted for by individuals w ho became an irregular
employee because there w ere no regular employee positions open.2) Number of irregular employees in the 15-24 age group does not include individuals still going to school.
0
1
2
3
4
5
6
7
8
9
90 92 94 96 98 00 02 04 06 08 10 12 14 16
(%)
(CY)
15~24 25~34 35~44 45~54 55~64 65 and over
Source: Ministry of Interna l Affa irs and Com m unication, Ministry of Health, Labour and
W elfare; com piled by DIR
S tructural a nd F rictional Unemp loyment Ra tes by Ag e G roup
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 25
Consumption(8)
0
10
20
30
40
50
60
70
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
①-② Interest is too low( ①) Interest is too high( ②)
( %, %pt)
(FY)
QQE1 QQE2
Negative Interest Rate
Usecured Call Rate Overnight Reduction
( 0.3%→0.1%)
Note: Ratio of responses to survey regarding level of interest rate (too low : too high).Source: Bank of Japan; compiled by DIR.
Individual Opinions Regarding Level of Interest Rate
-100
0
100
200
300
400
500
0 200 400 600 800 1,000 1,200 1,400 1,600
Deposits and Securities Holdings by Age of Head of Household ( Households
holding financial assets、2015)
(Amounts Held in Deposits, Y10,000)
(Securities Holdings, Y10,000)
20s
70s and older
60s
50s
40s
30sOverall
Effect of Fluctuation in Interest Rates on Deposits (Greater in Direction of Arrow)
Effe
ct o
f Flu
ctu
atio
n in
Sto
ck
Pric
es
(Gre
ate
r in D
irectio
n o
f Arro
w)
Source: Central Council for Financial Services Information, Ministry of General Affairs and Communication; compiled by DIR.
Note: Size of circles represents number of households as of 2015. Overall category is a simple average of number of households.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
Impacts on Consumption Vary
by Types of Labor Market Improvement
26
5.3
0.7
1.9
-2
-1
0
1
2
3
4
5
6
7
Contractual cash earnings Bonuses No. of employees
Durables Semi-durables
Non-durables Services
Personal consumption
Increase in consumption spending (Y tril)
Impact of 2% Rise in Employee Compensation on Personal Consumption
Source: Cabinet Office, Ministry of Health, Labour and Welfare, Ministry of Internal Affairs and Communications; compiled by DIR.
Note: Employee compensation expressed as "total cash payments multiplied by no. of employees". If employee compensation
rises 2%, contractual cash earnings would be up 2.4%, bonuses up 12.0%, and no. of employees up 2.0%. If this is the
case, personal consumption would increase as shown in the chart. Estimation period: Jan-Mar 1994 to Apr-Jun 2013.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 27
Unit Purchase Price of Foodstuffs in
Downward Trend
98
100
102
104
106
108
110
123456789101112123456789101112123456789101112123456789101112123456789101112123456789101112123456789101112
2010 2011 2012 2013 2014 2015 2016
(2013=100)
(Mo)(Yr)
Unit Purchase Price Consumer Price
Changes in Unit Purchase Price Index and Consumer Price Index (Foodsuffs)
Source: Ministry of Internal Affairs and Communications; Compiled by DIR.Note: Figures are seasonally adjusted and use the 3-month moving average.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
US Consumer Confidence Is Favorable
28
40
50
60
70
80
90
100
110
120
130
0
20
40
60
80
100
120
140
160
180
200
220
240
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
(CY2005=100)
Japan's Coincidence Index (right)
US Consumer Confidence Index (left)4
14
3
2
1
(CY)
US Consumer Confidence and Japan's Economy
Source: Cabinet office, Conference Board; compiled by DIR. Notes: 1) Shaded areas denote economic downturns in Japan.
2) Figures in boxes: Months preceding Japan's economic trough.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
G lobal M oney Flow s 2015
-224
-124
-334
Bonds Stocks DI
Japan to Oceania
Oceania
La tin
Am ericaAsia
Eurozone UK
US Japan
-727
-819
-4427
-1902
-590
291
-567
-681
881 115
92
2525
1328
509
1837
10784
11004
220
-1103 -24878 23774
7871 -1792 9663
-1072
41801
42872
-1798
686
2484
601
-1003
1604
1194
-998
10808
Bonds Stocks DI
Eurozone to US
3605
191
6988
Bonds Stocks DI
US to Eurozone
8543
-1095
422
Bonds Stocks DI
UK to US
-4598
1566 1240
Bonds Stocks DI
US to UK
-2639
379
1441
Bonds Stocks DI
Japan to US
-854
-94
221
Bonds Stocks DI
US to Japan
471
-1711
236
Bonds Stocks DI
Asia to US
-2285
1615 1271
Bonds Stocks DI
US to Asia
228
5 59
Bonds Stocks DI
Oceania to US
-971 183 198
Bonds Stocks DI
US to Oceania
1933
-1316
711
Bonds Stocks DI
Latin America to US
-1600
680
2757
Bonds Stocks DI
US to Latin America
-24409 -186 -282
Bonds Stocks DI
Eurozone to Japan
255
-615 -743
Bonds Stocks DI
Japan to Eurozone
41123
736
-58
Bonds Stocks DI
UK to Japan
-277 -169
-625
Bonds Stocks DI
Japan to UK
577
-91
200
Bonds Stocks DI
Asia to Japan
-243 -277
-1278
Bonds Stocks DI
Japan to Asia
-578
2 9
Bonds Stocks DI
Oceania to Japan
-1793 -23 -86
Bonds Stocks DI
Latin America to Japan
-119
-3940
-369
Bonds Stocks DI
Japan to Latin America
Source: US Dept. of Treasury, US Dept. of Commerce, Ministry of Finance; compiled by DIR.
Note: Unit: 100 mil dlrs, annualized rate. Data for Eurozone to Japan includes EU (25 countries) and UK. Asia does not include Japan. Latin America includes the Caribbean. Data for US-Oceania includes only Australia.
US Role as World’s Banker
29
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
Influence of US and European Monetary
Policy on World Economy
30
US Interest Rate
Hikes
EU Quantitative
Easing
2015 0.01% 0.00% 0.02% 0.00%
2016 -0.09% -0.14% 0.09% 0.00%
2017 -0.27% -0.34% 0.13% 0.00%
2015 0.02% 0.00% 0.04% 0.01%
2016 -0.06% -0.15% 0.14% 0.02%
2017 -0.25% -0.39% 0.20% -0.01%
2015 0.01% 0.00% 0.02% 0.00%
2016 -0.08% -0.12% 0.09% -0.01%
2017 -0.24% -0.31% 0.12% -0.05%
2015 0.01% 0.00% 0.03% 0.00%
2016 -0.08% -0.13% 0.10% 0.00%
2017 -0.25% -0.34% 0.14% -0.02%
World
US Interest Rate Hikes + EU Quantitative EasingUS Interest Rate Hikes
at Neutral Pace + EU
Quantitative Easing
US
EU
Emerging
Nations
① ②
Source: Compiled by DIRNotes: 1) Cumulative rate of deviation from baseline.
2) Figures for the w orld are a total of the values of the US, EU, and the emerging nations (covers about 82% of w orld GDP).3) The US interest rate hike case starts in the Oct-Dec period of 2015, and assumes increases in the 10-yr bond yield of 25bp at a time for 8 consecutive quarters.4) The EU quantitative easing case starts in the Jan-Mar period of 2015 and assumes an expansion of the ECB balance sheet of 180bil Euros at a
time for 8 consecutive quarters.5) Simulation run using the DIR w orld economic model.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
Fundamentals of Emerging Nations Improve
31
Source: Haver Analytics; compiled by DIR.
Notes: 1) Arrows denote shift of positions at critical moments to 2012.
2) Year of crises defined as 1994 for Mexico, 1997 for Thailand and Indonesia, 1998 for Russia, 1999 for Brazil,
2001 for Turkey, and 2002 for Argentina.
3) Size of circles shows ratio of foreign reserves to foreign debt with less than one-year maturity. The larger the
circle, the greater the resilience.
Risk Resilience of Emerging Market Economies
0
2
4
6
8
10
12
14
16
01020304050
Debt service ratio (%)
Mexico
Thailand
Argentina
Indonesia
Risk resilience
to strengthen
Risk resilience
to weaken
Public finance to
strengthenPublic finance to weaken
Russia
Turkey
Brazil
120
Ratio o
f fo
reig
n r
eserv
es t
o im
port
valu
e p
er
month
(tim
es)
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 32
How Far will Yuan Depreciate?
80
90
100
110
120
130
140
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Haver Anlytics; compiled by DIR.
The yuans' real effective exchange rate
(2010=100)
20%
30%
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 33
Capital Flight from China
-150
-100
-50
0
50
100
150
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
05 06 07 08 09 10 11 12 13 14 15 16
(Bil.USD)
(CY)
Changes in Reserves
Foreign Reserves
Source: PBOC
China's Foreign Reserves
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
2000 2002 2004 2006 2008 2010 2012 2014 2016
(MIl.$)
Financial/capital account balanceCurrent account balanceChg. in foreign reserves
Source: Haver Ana lytics; com piled by DIR .
China’s ba lance o f international payments
(CY)
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 34
0
1
2
3
4
5
6
7
8
9
10
84
86
88
90
92
94
96
98
100
12 13 14 15 16
Boosting effect (right axis)
Estimate
If foreign exchange rates had remained flat from October 2012
Estimated export-boosting effect of weak yen
Source: Ministry of Finance, Bank of Japan, and Netherlands Bureau for Econom icPolicy Analysis statistics; Com piled by DIR
(2010=100)
(CY)
Boosting effect
(pt)
-10
-8
-6
-4
-2
0
2
4
6
8
10
12/11 13/3 13/7 13/11 14/3 14/7 14/11 15/3 15/7 15/11 16/3
Residual + approximation error Nominal effective exchange
Relative export price Japan export share trend-cycle component
Global production ex Japan Export volume index cumulative change (3MA)
Export volume index cumulative change factor analysis
(Year/Month)
Note: Relative export price=Japan export price/world export price ex Japan (in US dollars).
Source: Ministry of Finance, Bank of Japan, and Netherlands Bureau for Econom ic Policy Analysis statistics; Com piled by DIR
(Cum ulative change since November 2012, pt)
Export-boosting effect of weak yen
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved. 35
How should we think about immigration?
Emmanuel Todd Family Types
Parent-child relationship
Equal
(separate
residences)
Unequal (same
residence)
Filia
l rela
tionsh
ip
Equal
FranceChina
Russia
Unequ
al
UK Japan
US Germany
Source: Compiled by DIR.
Copyright © 2016 Daiwa Institute of Research Ltd. All rights reserved.
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