The Bank of Japan’s huge monetary expansion programme has raised fears of a flood of Japanese hot money among emerging markets policymakers.

But hold on, says Citigroup in a report. If flows are correctly managed, their effects could be positive: Japanese investment should make it easier for EMs to finance external and fiscal deficits and so allow faster domestic spending growth. Far from destabilising EMs, says Citi, the BoJ could help them rebalance away from exports and in favour of consumption.

It all sounds a bit optimistic. But let’s take a look at Citi’s logic. Continue reading »

Asia’s emerging markets took the Bank of Japan’s latest radical monetary loosening in their stride, with fairly muted responses to governor Haruhiko Kuroda’s dramatic announcement.

While the Japanese stock market soared 2.2 per cent and the yen dropped 2.7 per cent against the dollar, the reaction elsewhere in east Asia was less than overwhelming. But this could change, as the implications sink in. Continue reading »

The First Philippine Industrial Park, some 50km south of Manila, is already a whopper, accounting for about 3 per cent of the country’s total exports. Which is why it is notable that Sumitomo Corporation, the Japanese trading house that owns 30 per cent of it, wants to make it even bigger. Continue reading »

Dollars and yen piling upRemember the yen carry trade? Sure you do: when lots of smart people took advantage of Japan’s low interest rate to borrow and then invest in currencies with higher interest rates? (Ah, that carry trade.)

Well, with Japan’s new aggressive monetary stance, it’s back (in a way). And that should force EM currencies to appreciate, as before, shouldn’t it?

Perhaps not, according to Bhanu Banweja of UBS. Continue reading »

Mrs Watanabe is back. The fabled Japanese housewife investor, burned by her love affair with the Brazilian real, appeared to have rediscovered a taste for the carry trade.

The object of her affection this time? The Turkish lira.

The appetite for Turkish and lira-linked assets from yield-hungry Japanese retail investors has grown by leaps and bounds since the start of the year. From just $136m in 2010, lira-denominated Uridashi bond issuance – as foreign-currency debt sold to Japanese retail investors is called – reached nearly $2bn in the first six months of this year. Continue reading »

But what are they drinking?

With an ageing population and slow growth at home, Asahi, the brewer and soft drinks maker, is one of many Japanese consumer companies keen to expand into emerging markets.

Indofood, Indonesia’s biggest maker of instant noodles by volume, wants to use its well-established distribution chain in this sprawling country of 240m people to sell a wider range of goods to the fast-growing middle class.

So a tie-up between the two, as was unveiled on Monday, seems to make much sense for both parties. Continue reading »