'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/525/original/File%202020-04-12%203%2030%2058.jpeg?1586636737" class="editor-image img-responsive" data-smartkarma-image-id="127525"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/559/original/File%202020-04-12%208%2003%2009.jpeg?1586646443" class="editor-image img-responsive" data-smartkarma-image-id="127559"></figure><div class="content-caption">Source • ourworldindata.org</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/550/original/File%202020-04-12%207%2012%2036.jpeg?1586643194" class="editor-image img-responsive" data-smartkarma-image-id="127550"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/551/original/File%202020-04-12%207%2014%2052.jpeg?1586643688" class="editor-image img-responsive" data-smartkarma-image-id="127551"></figure><div class="content-caption">Source • Financial Times</div>CONTAINMENT NOT CONTAGION (SO FAR) - In the last week, the number of daily new confirmed cases of COVID-19 has increased from 300-400 to 500-600 of which Tokyo represents about one third. The case count is rising in many hitherto unaffected prefectures, partly as a result of migrations out of the seven prefectures which are under the 'state of emergency' declared on 7th April and also due to the return of asymptomatic Japanese nationals based overseas. The number of active cases (currently 6,279), those in critical care (122) and deaths (114) have yet to peak, although on a per capita basis Japan is in line with its East Asian neighbours. For the Japanese social distancing 'experiment' to be deemed successful, the 7-day rolling peak number of new cases needs to be below 1,000.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/573/original/IMG_1249.jpg?1586663212" class="editor-image img-responsive" data-smartkarma-image-id="127573"></figure><div class="content-caption">Source • NHK</div>NO-LOCKDOWN 'LOCKDOWN' - Japan's evolving compromise between social distancing and preserving the economy has revealed tensions between the central and local governments over the implementation of the powers that the former has ceded to the latter. Governor Koike had pressed for a broader range of business closures but relented over beauty salons and barbershops. DIY stores, convenience stores and restaurants can also remain open provided social distancing measures are implemented. Prefectures that were not included in the initial seven have now proposed measures of their own, including compensation for businesses forced to close which the national government has, so far, ruled out. Although no curfews have been instituted a ban on selling alcohol after seven o'clock is a reasonable 'carrot-like' alternative. From the helicopter that NHK paid to survey the scene, Tokyo was all-but-deserted on Saturday night. On Sunday. The 'recommendation' to refrain from going to bars and nightclubs has been extended to cover the whole of Japan. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/575/original/lots-of-hanko.jpg?1586663417" class="editor-image img-responsive" data-smartkarma-image-id="127575"></figure><div class="content-caption">Source • Wikimedia Commons</div>WFH - PM Abe has very forcibly called for companies to institute 'WFH' for up to 70% of clerical staff - a factor which supports our continued bullish view for the Information Technology Sector. A Tokyo Chamber Of Commerce survey suggests that less 54% of SMEs do not intend to comply. The problem of the use of personal seals or 'hanko' for the certification of documents remains, requiring many employees to trek into the office to affix them. Perhaps this is a business opportunity for <a href="https://www.smartkarma.com/entities/sansan-inc" target="_blank" data-smartkarma-citation="entities:28112:1" rel="noopener">Sansan (4443 JP)</a>?SIDELINED - In recent weeks, Japan's COVID-19 policy response has been led more by the Cabinet Office and Economic and Fiscal Policy Minister Yasutoshi Nishimura rather than the Kato-san of the Ministry of Health, Labour and Welfare. Kato-san and his bureaucrats have fallen out of favour for their handling of the Diamond Princess, inflexibility over testing and the rules requiring all positive cases to be hospitalised and the approval process of <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp" target="_blank" data-smartkarma-citation="entities:16353:1" rel="noopener">Fujifilm (4901 JP)</a>'s drug Avigan for use in COVID-19 cases. For better or worse, Japan's response to COVID-19 is being driven by broader considerations than the longevity of its elderly citizens.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/571/original/2020-04-12_12-13-13.png?1586661205" class="editor-image img-responsive" data-smartkarma-image-id="127571"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/572/original/2020-04-12_12-12-59.png?1586661219" class="editor-image img-responsive" data-smartkarma-image-id="127572"></figure><div class="content-caption">Source • EpiCentro/Istituto Superiore di Sanità </div>HARD CHOICES - It is highly unlikely that Japan's first 'wave' of COVID-19 infections will peak conveniently to coincide with the Golden Week holiday period. However, as is becoming evident in New York City, the impact of 'total lockdowns' has been overestimated relative to social distancing Temporary overflow hospitals are empty, and in some US states have been closed or handed back to the military. <a href="https://www.epicentro.iss.it/en/coronavirus/bollettino/Report-COVID-2019_2_april_2020.pdf" target="_blank" rel="noopener">Evidence</a> from Italy's EpiCentro/Istituto Superiore di Sanità shows that the vast majority of fatalities are found in those over 60 years of age who have one or more comorbidity. These findings are also valid for Japan and other developed countries. As the economic cost of the moral imperative behind lockdowns becomes clear, the pressure to restart will increase, and the protocols for reaching herd immunity will be debated. The likelihood of second and third 'waves' before the widespread availability of mass-testing or vaccinees may require semi-permanent social-distancing for the most vulnerable and prolonged shutdowns of the crowded, noisy indoor venues that attract the most foolhardy. By anticipating the post-COVID protocols, The approach adopted by Taiwan, South Korea, Singapore and Japan offers a better glide-path to economic recovery. All are, however, dependent on the major Western economies, currently pickled in aspic, finding their exit strategies before summer.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/661/original/File%202020-04-13%205%2057%2023.jpeg?1586725178" class="editor-image img-responsive" data-smartkarma-image-id="127661"></figure><div class="content-caption">Source • gotazual@nyit.edu</div>PRO-VAX - Another factor in Japan's favour is the country's early adoption, in 1947, of a universal childhood BCG vaccination programme. A recent <a href="https://www.medrxiv.org/content/10.1101/2020.03.24.20042937v1" target="_blank" rel="noopener">study</a> has found that "countries without universal policies of BCG vaccination (Italy, Netherlands, Belgium United States) have been more severely affected compared to countries with universal and long-standing BCG policies. Countries that have a late start of universal BCG policy (Iran, 1984) had high mortality, consistent with the idea that BCG protects the vaccinated elderly population. We also found that BCG vaccination also reduced the number of reported COVID-19 cases in a country. The combination of reduced morbidity and mortality makes BCG vaccination a potential new tool in the fight against COVID-19." Ironically for President Bolsonaro, Brazil's programme started in 1920 and currently has an even lower mortality rate than Japan.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/583/original/File%202020-04-12%2014%2045%2024.jpeg?1586670339" class="editor-image img-responsive" data-smartkarma-image-id="127583"></figure><div class="content-caption">Source • oec.world</div>CHINA PASSING - Of longer-term significance, Japan's COVID-19 stimulus package includes U¥220 billion to support Japanese companies moving production facilities out of China. Imports from China have fallen by more than 50% year-on-year and many Japanese manufacturers have been starved of critical components. While high-value-added parts will be shifted home, others could be sourced from SouthEast Asian countries.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/586/original/File%202020-04-12%2015%2002%2044.jpeg?1586671392" class="editor-image img-responsive" data-smartkarma-image-id="127586"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/587/original/File%202020-04-12%2015%2006%2029.jpeg?1586671741" class="editor-image img-responsive" data-smartkarma-image-id="127587"></figure><div class="content-caption">Source • McKinsey</div>FOOD SECURITY - Meanwhile, several countries, including India, Russia, Kazakhstan, Ukraine, Vietnam, and Romania, are restricting exports of foodstuffs. Fortunately for Japan, much of the nations food imports come from the United States, Australia and Canada. Nevertheless, we expect a repeat of the 2008 food price inflation before the summer and suggest 'treading carefully; in the currently buoyant Food Beverage &amp; Tobacco Sector.<div>
SELECTIVELY BULLISH - While Japan's globally-orientated companies will struggle with almost no demand from the lockdown economies, specific domestic Sectors and Peer Groups, such as Information Technology and Internet Content &amp; Services are thriving in the COVID economy. Overall, by resisting a total lockdown, Japan remains relatively well-placed for 'the other side'. 
In the DETAIL section below, we shall provide an update on the market overall, look at Sector and Peer Group performance and review the results and revision announcements made on Friday.
<blockquote>It is not given to human beings - happily for them, for otherwise life would be intolerable - to foresee or to predict to any large extent the unfolding course of events." - Winston Churchill</blockquote>
</div>

Source • ourworldindata.orgSource • Financial TimesCONTAINMENT NOT CONTAGION (SO FAR) - In the last week, the number of daily new confirmed cases of COVID-19 has increased from 300-400 to 500-600 of which Tokyo represents about one third. The case count is rising in many hitherto unaffected prefectures, partly as a result of migrations out of the seven prefectures which are under the 'state of emergency' declared on 7th April and also due to the return of asymptomatic Japanese nationals based overseas. The number of active cases (currently 6,279), those in critical care (122) and deaths (114) have yet to peak, although on a per capita basis Japan is in line with its East Asian neighbours. For the Japanese social distancing 'experiment' to be deemed successful, the 7-day rolling peak number of new cases needs to be below 1,000.Source • NHKNO-LOCKDOWN 'LOCKDOWN' - Japan's evolving compromise between social distancing and preserving the economy has revealed tensions between the central and local governments over the implementation of the powers that the former has ceded to the latter. Governor Koike had pressed for a broader range of business closures but relented over beauty salons and barbershops. DIY stores, convenience stores and restaurants can also remain open provided social distancing measures are implemented. Prefectures that were not included in the initial seven have now proposed measures of their own, including compensation for businesses forced to close which the national government has, so far, ruled out. Although no curfews have been instituted a ban on selling alcohol after seven o'clock is a reasonable 'carrot-like' alternative. From the helicopter that NHK paid to survey the scene, Tokyo was all-but-deserted on Saturday night. On Sunday. The 'recommendation' to refrain from going to bars and nightclubs has been extended to cover the whole of Japan. Source • Wikimedia CommonsWFH - PM Abe has very forcibly called for companies to institute 'WFH' for up to 70% of clerical staff - a factor which supports our continued bullish view for the Information Technology Sector. A Tokyo Chamber Of Commerce survey suggests that less 54% of SMEs do not intend to comply. The problem of the use of personal seals or 'hanko' for the certification of documents remains, requiring many employees to trek into the office to affix them. Perhaps this is a business opportunity for Sansan (4443 JP)?SIDELINED - In recent weeks, Japan's COVID-19 policy response has been led more by the Cabinet Office and Economic and Fiscal Policy Minister Yasutoshi Nishimura rather than the Kato-san of the Ministry of Health, Labour and Welfare. Kato-san and his bureaucrats have fallen out of favour for their handling of the Diamond Princess, inflexibility over testing and the rules requiring all positive cases to be hospitalised and the approval process of Fujifilm (4901 JP)'s drug Avigan for use in COVID-19 cases. For better or worse, Japan's response to COVID-19 is being driven by broader considerations than the longevity of its elderly citizens.Source • EpiCentro/Istituto Superiore di Sanità HARD CHOICES - It is highly unlikely that Japan's first 'wave' of COVID-19 infections will peak conveniently to coincide with the Golden Week holiday period. However, as is becoming evident in New York City, the impact of 'total lockdowns' has been overestimated relative to social distancing Temporary overflow hospitals are empty, and in some US states have been closed or handed back to the military. Evidence from Italy's EpiCentro/Istituto Superiore di Sanità shows that the vast majority of fatalities are found in those over 60 years of age who have one or more comorbidity. These findings are also valid for Japan and other developed countries. As the economic cost of the moral imperative behind lockdowns becomes clear, the pressure to restart will increase, and the protocols for reaching herd immunity will be debated. The likelihood of second and third 'waves' before the widespread availability of mass-testing or vaccinees may require semi-permanent social-distancing for the most vulnerable and prolonged shutdowns of the crowded, noisy indoor venues that attract the most foolhardy. By anticipating the post-COVID protocols, The approach adopted by Taiwan, South Korea, Singapore and Japan offers a better glide-path to economic recovery. All are, however, dependent on the major Western economies, currently pickled in aspic, finding their exit strategies before summer.Source • gotazual@nyit.eduPRO-VAX - Another factor in Japan's favour is the country's early adoption, in 1947, of a universal childhood BCG vaccination programme. A recent study has found that "countries without universal policies of BCG vaccination (Italy, Netherlands, Belgium United States) have been more severely affected compared to countries with universal and long-standing BCG policies. Countries that have a late start of universal BCG policy (Iran, 1984) had high mortality, consistent with the idea that BCG protects the vaccinated elderly population. We also found that BCG vaccination also reduced the number of reported COVID-19 cases in a country. The combination of reduced morbidity and mortality makes BCG vaccination a potential new tool in the fight against COVID-19." Ironically for President Bolsonaro, Brazil's programme started in 1920 and currently has an even lower mortality rate than Japan.Source • oec.worldCHINA PASSING - Of longer-term significance, Japan's COVID-19 stimulus package includes U¥220 billion to support Japanese companies moving production facilities out of China. Imports from China have fallen by more than 50% year-on-year and many Japanese manufacturers have been starved of critical components. While high-value-added parts will be shifted home, others could be sourced from SouthEast Asian countries.Source • McKinseyFOOD SECURITY - Meanwhile, several countries, including India, Russia, Kazakhstan, Ukraine, Vietnam, and Romania, are restricting exports of foodstuffs. Fortunately for Japan, much of the nations food imports come from the United States, Australia and Canada. Nevertheless, we expect a repeat of the 2008 food price inflation before the summer and suggest 'treading carefully; in the currently buoyant Food Beverage &amp; Tobacco Sector.
SELECTIVELY BULLISH - While Japan's globally-orientated companies will struggle with almost no demand from the lockdown economies, specific domestic Sectors and Peer Groups, such as Information Technology and Internet Content &amp; Services are thriving in the COVID economy. Overall, by resisting a total lockdown, Japan remains relatively well-placed for 'the other side'. 
In the DETAIL section below, we shall provide an update on the market overall, look at Sector and Peer Group performance and review the results and revision announcements made on Friday.
It is not given to human beings - happily for them, for otherwise life would be intolerable - to foresee or to predict to any large extent the unfolding course of events." - Winston Churchill


🇯🇵 JAPAN MARKET (& COVID-19) UPDATE - 12th April • To Each Their Own

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On 10 April 2020 after the close, two subsidiaries of <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">Aeon Co Ltd (8267 JP)</a> based in the southernmost of Japan's four main islands - <a href="https://www.smartkarma.com/entities/maxvalu-kyushu-co-ltd" target="_blank" data-smartkarma-citation="entities:18842:1" rel="noopener">Maxvalu Kyushu (3171 JP)</a> and <a href="https://www.smartkarma.com/entities/aeon-kyushu-co-ltd" target="_blank" data-smartkarma-citation="entities:11573:1" rel="noopener">Aeon Kyushu (2653 JP)</a> announced plans to merge on 1 September 2020. The larger of the two - Aeon Kyushu - will be the surviving company.The ratio is set to 1.5 : 1 which is to say that MaxValu Kyushu shareholders will get 1.5 Aeon Kyushu shares for every 1 MaxValu Kyushu shares held. The vote is a foregone conclusion as Aeon itself owns 77% of MV Kyushu and 67.9% of Aeon Kyushu. There may be something to do here.

On 10 April 2020 after the close, two subsidiaries of Aeon Co Ltd (8267 JP) based in the southernmost of Japan's four main islands - Maxvalu Kyushu (3171 JP) and Aeon Kyushu (2653 JP) announced plans to merge on 1 September 2020. The larger of the two - Aeon Kyushu - will be the surviving company.The ratio is set to 1.5 : 1 which is to say that MaxValu Kyushu shareholders will get 1.5 Aeon Kyushu shares for every 1 MaxValu Kyushu shares held. The vote is a foregone conclusion as Aeon itself owns 77% of MV Kyushu and 67.9% of Aeon Kyushu. There may be something to do here.

Aeon Subs Aeon Kyushu | MaxValu Kyushu To Merge - Done Deal, Ungreat Ratio

Quantitative Analysis

<blockquote>
Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19)
Global financial and capital markets have been unstable, with growing uncertainties over the global economy due mainly to the impact of the outbreak of COVID-19. Under the circumstances, Japan's economic activity has been weak recently (see Attachment). In addition, financial conditions have become less accommodative, as seen partly in corporate financing such as the financial positions of small and medium-sized firms.
Given these developments, the Bank of Japan judged it appropriate to enhance monetary easing through (1) the further ample supply of funds by conducting various operations including purchases of Japanese government bonds (JGBs) and the U.S. dollar funds-supplying operations, (2) measures to facilitate corporate financing including the introduction of a new operation, and (3) active purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). The Bank will take these measures with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms' and households' sentiment from deteriorating.
</blockquote>To further those goals, the BOJ decided to...<ol>
<li>
Provide ample yen funds through further JGB buying, and through other measures described in #2-3. As for U.S. dollar liquidity, coordinated with the Bank of Canada (BOC), the Bank of England (BOE), the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank (SNB), regarding the U.S. dollar funds-supplying operations, the Bank made public today to lower the loan rate by 0.25 percent and offer U.S. dollars weekly 2 with an 84-day maturity, in addition to the 1-week maturity operations currently offered. </li>
<li>
Introduction of the Special Funds-Supplying Operations to Facilitate Corporate Financing regarding the Novel Coronavirus (COVID-19).  <ol>
<li>The Bank decided to provide loans against corporate debt (of about 8 trillion yen as of end-February 2020) as collateral at the interest rate of 0 percent with maturity up to one year. Twice as much as the amount outstanding of the loans will be included in the Macro Add-on Balances in current accounts held by financial institutions at the Bank. This operation will be conducted until the end of September 2020.</li>
<li>Increase in purchases of CP and corporate bonds The Bank decided, by a unanimous vote, to increase the upper limit to purchase CP and corporate bonds by 2 trillion yen in total and conduct purchases with the upper limit of their amounts outstanding of about 3.2 trillion yen and about 4.2 trillion yen, respectively. The additional purchases will continue until the end of September 2020</li>
</ol>
</li>
<li>
Do more Active ETF and JREIT Buying: The Bank decided, by a unanimous vote, to actively purchase ETFs and J-REITs for the time being so that their amounts outstanding will increase at annual paces with the upper limit of about 12 trillion yen and about 180 billion yen, respectively.</li>
</ol>After the BOJ announced this, the market fell. Some of this increase was expected because of various local media commentary by informed sources, suggesting the BOJ was considering measures like this. The reason the market fell was likely profit-taking - a sell-the-news phenomenon.The other possible reason for selling was disappointment that the new level of ETF buying was not made permanent.Those who are "disappointed" by this are mistaken.The BOJ will buy at that increased rate as long as it needs to supply funds to the market. If the market doesn't go up, they will likely keep on buying "for the time being." If the market goes up, then the program has been a success. Understanding the practical impacts is important. That's discussed below.


Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19)
Global financial and capital markets have been unstable, with growing uncertainties over the global economy due mainly to the impact of the outbreak of COVID-19. Under the circumstances, Japan's economic activity has been weak recently (see Attachment). In addition, financial conditions have become less accommodative, as seen partly in corporate financing such as the financial positions of small and medium-sized firms.
Given these developments, the Bank of Japan judged it appropriate to enhance monetary easing through (1) the further ample supply of funds by conducting various operations including purchases of Japanese government bonds (JGBs) and the U.S. dollar funds-supplying operations, (2) measures to facilitate corporate financing including the introduction of a new operation, and (3) active purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). The Bank will take these measures with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms' and households' sentiment from deteriorating.
To further those goals, the BOJ decided to...

Provide ample yen funds through further JGB buying, and through other measures described in #2-3. As for U.S. dollar liquidity, coordinated with the Bank of Canada (BOC), the Bank of England (BOE), the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank (SNB), regarding the U.S. dollar funds-supplying operations, the Bank made public today to lower the loan rate by 0.25 percent and offer U.S. dollars weekly 2 with an 84-day maturity, in addition to the 1-week maturity operations currently offered. 

Introduction of the Special Funds-Supplying Operations to Facilitate Corporate Financing regarding the Novel Coronavirus (COVID-19).  
The Bank decided to provide loans against corporate debt (of about 8 trillion yen as of end-February 2020) as collateral at the interest rate of 0 percent with maturity up to one year. Twice as much as the amount outstanding of the loans will be included in the Macro Add-on Balances in current accounts held by financial institutions at the Bank. This operation will be conducted until the end of September 2020.
Increase in purchases of CP and corporate bonds The Bank decided, by a unanimous vote, to increase the upper limit to purchase CP and corporate bonds by 2 trillion yen in total and conduct purchases with the upper limit of their amounts outstanding of about 3.2 trillion yen and about 4.2 trillion yen, respectively. The additional purchases will continue until the end of September 2020



Do more Active ETF and JREIT Buying: The Bank decided, by a unanimous vote, to actively purchase ETFs and J-REITs for the time being so that their amounts outstanding will increase at annual paces with the upper limit of about 12 trillion yen and about 180 billion yen, respectively.
After the BOJ announced this, the market fell. Some of this increase was expected because of various local media commentary by informed sources, suggesting the BOJ was considering measures like this. The reason the market fell was likely profit-taking - a sell-the-news phenomenon.The other possible reason for selling was disappointment that the new level of ETF buying was not made permanent.Those who are "disappointed" by this are mistaken.The BOJ will buy at that increased rate as long as it needs to supply funds to the market. If the market doesn't go up, they will likely keep on buying "for the time being." If the market goes up, then the program has been a success. Understanding the practical impacts is important. That's discussed below.

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

The following is an in-depth review of the drugstore sector and the impact of the Cocokara Fine and Matsukiyo merger on other key drugstore stocks, highlighting the likely winners and losers in the next 3-5 years.
The drugstore sector is about to consolidate more rapidly than at any time in its history, with big implications for the cosmetics, medicines, food and toiletries industries and, among retailers, worries for supermarkets and convenience stores.
The imminent merger of <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co (3088 JP)</a> and <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> will trigger a wave of other mergers among competitors big and small, creating a modernised sector with huge buying power across many product categories.
In food, in particular, this buying power is already causing headaches for retailers in regions like Kyushu where drugstore discounters are strong and this trend will play out across Japan over the next few years.  While the drugstore market may not grow, its leaders will.

The following is an in-depth review of the drugstore sector and the impact of the Cocokara Fine and Matsukiyo merger on other key drugstore stocks, highlighting the likely winners and losers in the next 3-5 years.
The drugstore sector is about to consolidate more rapidly than at any time in its history, with big implications for the cosmetics, medicines, food and toiletries industries and, among retailers, worries for supermarkets and convenience stores.
The imminent merger of Matsumotokiyoshi Holdings Co (3088 JP) and Cocokara Fine (3098 JP) will trigger a wave of other mergers among competitors big and small, creating a modernised sector with huge buying power across many product categories.
In food, in particular, this buying power is already causing headaches for retailers in regions like Kyushu where drugstore discounters are strong and this trend will play out across Japan over the next few years.  While the drugstore market may not grow, its leaders will.

Japanese Drugstores: With Maturity Comes Marriage

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/121/977/original/2020-03-09_14-29-36.png?1583731808" class="editor-image img-responsive" data-smartkarma-image-id="121977"></figure><div class="content-caption">Source • Stoxx.com</div>ALTMAN'S Z-SCORE - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy which built on the work of William Beaver and R.A. Fisher. Altman's original article (attached below) was published in the September 1968 issue of the Journal of Finance when he was an assistant professor of finance at NYU Stern.  The 'classic' Z-Score sampled publically-traded manufacturing companies. Later versions were formulated for private companies, non-manufacturing companies and emerging markets.  The model is between 80% and 90% accurate in predicting bankruptcy one year ahead of the event, while the rate of false positives has been between 15% and 20%.APPLICATION TO JAPAN - We have been using Altman Z-Scores in Japan since the mid-1980s. We have found the Scores to be reasonably predictive, as has been confirmed by several academic papers, including  <a href="https://www.semanticscholar.org/paper/A-Model-of-Bankruptcy-Prediction%3A-Calibration-of/5565168f75b578ba28115ef314acbdd387f82483" target="_blank" rel="noopener">Gurau (2013)</a>. The persistence of a large number of 'zombie' companies supported by banks or keiretsu 'relatives' has, however, reduced the overall 'hit' rate for larger listed companies. The following charts show a timeline of the Altman Z-Score and Market Capitalisation for several memorable Japanese corporate bankruptcies. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/005/original/2020-03-09_15-53-11.png?1583736804" class="editor-image img-responsive" data-smartkarma-image-id="122005"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/006/original/2020-03-09_15-54-52.png?1583736903" class="editor-image img-responsive" data-smartkarma-image-id="122006"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/007/original/2020-03-09_15-56-58.png?1583737032" class="editor-image img-responsive" data-smartkarma-image-id="122007"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/009/original/2020-03-09_15-59-08.png?1583737161" class="editor-image img-responsive" data-smartkarma-image-id="122009"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/011/original/2020-03-09_16-03-28.png?1583737425" class="editor-image img-responsive" data-smartkarma-image-id="122011"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-highlight">This Insight is the second part of a three-part series attempting to highlight those Japanese companies that at the highest risk from the 2020 Covid-19 recession. The first focused on the<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-1-audit-score" target="_blank" data-smartkarma-citation="insights:37265" rel="noopener">Audit Score</a>, while a forthcoming Insight will look at Cumulative Cash Flows.</div>

Source • Stoxx.comALTMAN'S Z-SCORE - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy which built on the work of William Beaver and R.A. Fisher. Altman's original article (attached below) was published in the September 1968 issue of the Journal of Finance when he was an assistant professor of finance at NYU Stern.  The 'classic' Z-Score sampled publically-traded manufacturing companies. Later versions were formulated for private companies, non-manufacturing companies and emerging markets.  The model is between 80% and 90% accurate in predicting bankruptcy one year ahead of the event, while the rate of false positives has been between 15% and 20%.APPLICATION TO JAPAN - We have been using Altman Z-Scores in Japan since the mid-1980s. We have found the Scores to be reasonably predictive, as has been confirmed by several academic papers, including  Gurau (2013). The persistence of a large number of 'zombie' companies supported by banks or keiretsu 'relatives' has, however, reduced the overall 'hit' rate for larger listed companies. The following charts show a timeline of the Altman Z-Score and Market Capitalisation for several memorable Japanese corporate bankruptcies. Source • Japan AnalyticsThis Insight is the second part of a three-part series attempting to highlight those Japanese companies that at the highest risk from the 2020 Covid-19 recession. The first focused on theAudit Score, while a forthcoming Insight will look at Cumulative Cash Flows.

🇯🇵 JAPAN • Who’s Swimming Naked? > Part 2: Altman Z-Score

Japan

AEON CO., LTD. operates general merchandise stores, supermarkets, and convenience stores throughout Japan. The Company is also engaged in women's and casual clothing store business, development business of commercial property, and financing service through the subsidiaries.

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Aeon Co Ltd (8267 JP)

🇯🇵 JAPAN MARKET (& COVID-19) UPDATE - 12th April • To Each Their Own

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Campbell Gunn

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Travis Lundy

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Travis Lundy

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Michael Causton

🇯🇵 JAPAN • Who’s Swimming Naked? > Part 2: Altman Z-Score

ALTMAN'S Z-SCORE - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy...

Campbell Gunn

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