Bystander’s View on Japan #4, June 26, 2012

Sorry to be one day delay. Things have been hectic recently. Markets also. This kind of market, however, is the time for fund managers to show their capability.

TOPICS of the WEEK:   Islamic Finance News ROADSHOW 2012” was held on June 21, 2012. This is once a year forum on Islamic Finance in Tokyo organized by Islamic Finance News. There were about 50 participants from financial sectors. Many lawyers and accountants also joined the forum. 

Major topics of this year was  J-sukuk, sukuk issued in Tokyo in Yen. There was heated discussion how the J-Sukuk market will be feasible mainly from legal aspects. Both issuers and investors are hesitant to get into the market, I believe. Without massaging the hesitant, noting will happen. 

Issuers: There is not much necessity for Japanese companies to issue sukuk in Tokyo.There may be some necessity for project financing in Islamic countries.Corporate issuers will go to Samuai-bonds instead of J-sukuk. Samurai-bonds are easier and have acquired supports from Japanese investors.Investors: If the return is attractive, many institutional investors will join into the markets.Japanese trust banks, trustee for sukuk, is not ready in understanding the structure 

           Artificial efforts would not create new markets. Markets can exist only where “meeting of minds” can happen. 


                               June 22           June 15             Change

               Nikkei      8798.35             8569.32             2.67% TOPIX     750.92               726.57               3.35% 

             The victory of relatively moderate parties at Greece and the stop of hiking Yen made the Japanese markets rise. What a short sighted markets participants are!  July will be the month of “Picking up Greece, and say the problems are handled OK.” and, “Citing possible QE3, and say the problems in the U.S. is under control.”                                                                            POLITICS:             Mr.Noda has acquired support to his comsumption tax hike from two opponents parties. It is, however, much harder for him to get support his own party. Mr. Ozawa, a shadow shogun, is openly saying that he will split DPJ by leading out 60 diet members with him.                           Political scene of Japan is very fluid again. This political risk is the largest risk factor to the stock markets.              I think the most likely scenario is Noda is going to split DPJ and makes alliance with LDP to form a new government.         ECONOMY:             General feeling of consumers are fine by getting into summer bonus season. 


              The radiation level of Tokyo is 0.048 sievert this morning. Same level as of  last week. The life in Tokyo is normal.