'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/000/129/661/original/2020-04-26_07-20-46.png?1587853286" class="editor-image img-responsive" data-smartkarma-image-id="129661"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>THE WEDGE</strong> - Both Japanese equities and the $/¥ exchange rate have traded in a narrow range over the last two weeks. Undeterred, the Bank of Japan intervened through ETF purchases three times last week. In total, since the low of March 16th, the central bank has bought ETFs equivalent to 3.5% of market value, and have supported a 15% 29-day rally. As the markets consolidate in anticipation of the impending 'rendezvous with reality' in the form of quarterly earnings, the resolution of the 'wedge' formations above will be to the downside.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/662/original/2020-04-26_07-39-05.png?1587854366" class="editor-image img-responsive" data-smartkarma-image-id="129662"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>CANARIES</strong> - As we noted in Friday's <a href="https://www.smartkarma.com/insights/japan-revisions-results-23rd-april-getting-worse-rapidly-obics-tgas-canon-omron" target="_blank" data-smartkarma-citation="insights:38697" rel="noopener">Results Review</a>, interim forecasts are a useful 'canary' and, with some help from <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a>, our composite Score is heading lower rapidly. A growing number of companies lacking Fanuc's candour are refusing to make initial full-year or interim forecasts this year leaving the market, and the sell-side, to 'fly blind'. The lack of foresight is resulting in a degree of misplaced optimism, as amply demonstrated by Friday's 7.5% gain in <a href="https://www.smartkarma.com/entities/omron-corp" target="_blank" data-smartkarma-citation="entities:15904:1" rel="noopener">Omron (6645 JP)</a> for 'beating' a six-month-old forecast for a mostly pre-COVID-19 year.     </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/665/original/File%202020-04-26%205%2006%2033.jpeg?1587856452" class="editor-image img-responsive" data-smartkarma-image-id="129665"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/666/original/File%202020-04-26%205%2007%2018.jpeg?1587856466" class="editor-image img-responsive" data-smartkarma-image-id="129666"></figure><p><strong>PERSISTENCE</strong> - Japan is still 'behind' the world and ahead of the rest of Asia in COVID-19 metrics - Marco Piani's excellent global timeline chart is attached as an Appendix in the DETAIL below. The number of confirmed new cases is persistent at around 300, of which, alarmingly, an increasing number are outside Tokyo, while the rolling 3-day number of deaths is moving more towards Europe than the rest of Asia. The northern island of Hokkaido which saw some of the earliest case clusters in Japan is experiencing a second wave of infections.  Nishimura, the Cabinet minister in charge of the response to COVID-19, is now in quarantine at home after one of his aides tested positive. Sunday has brought some welcome good news - the nationwide daily case count has declined to 140. <strong>Nevertheless, with just ten days until the proposed end of the states of emergency, at least one extension is likely, possibly until the end of May. Such a declaration is not yet discounted in the equity market.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/667/original/IMG_1515.jpg?1587857128" class="editor-image img-responsive" data-smartkarma-image-id="129667"></figure><div class="content-caption">Source • NHK</div><p><strong>PREVALENCE</strong> - Although a lack of widespread testing biases this data, the detected rates of infection by age cohort (descending in the chart above) and sex (male blue/female red) reveal the consequences of Japan's version of social distancing. The highest rates of infection are amongst those that have to commute or come into contact with others, men between the ages of 20 and 50 and childless women in their twenties, many of whom work in hospitals or check-out counters. 10% of all COVID-19 cases in Japan are medical staff or patients who were infected nosocomially.  Testing is still a major bottleneck due to excessive fax-centric bureaucracy and reliance on only non-private institutions. Only 6,000 tests are being carried out every day, two-thirds of total capacity, and the results take one week to obtain. </p><p><strong>PLEASE DIE AT HOME</strong> - A number of those infected with COVID-19 who have been told to 'stay home' as the hospitals are full are now dying in situ or on the street. Some local governments are being forced to change tack. All newly-confirmed patients that cannot be accommodated in hospitals are to be moved to hotels with medical staff in attendance. However, there is now a severe shortage of such personnel. Hospitals in Tokyo are still turning away suspected COVID-19 patients. Aichi prefecture has resorted to offering 'subsidies' of up to ¥4 million to hospitals for accepting new patients.</p><p><strong>ANTI-SOCIAL BEHAVIOUR</strong> - Japan is not immune to anti-social behaviour at the worst of times. Cars with license plates from other prefectures have been vandalised when parked or tailgated or verbally-abused on the road. Child care facilities are turning away children of hospital staff for fear they may already be asymptomatic carriers, prompting many medical workers to quit their jobs. Some companies are requiring employees who are working from home to be monitored by video during working hours to ensure they are at their desks and not helping out with the housework.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/670/original/title_1.jpg?1587859428" class="editor-image img-responsive" data-smartkarma-image-id="129670"></figure><div class="content-caption">Source • Sharp</div><p><strong>ABE-'NO-MASKS'</strong><strong>AND THE SHARP LOTTERY</strong> - The government has had to recall the small washable cloth masks that PM Abe planned to distribute two of per household due to mould, stains and insects being found in up to one-third of early batches. The roll-out of these much-criticised 'Abe masks' will be further delayed. Meanwhile, demand for <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp (6753 JP)</a>'s newly-manufactured higher quality single-use masks so overwhelmed the company's website, that Sharp has decided to hold a lottery as a way of rationing demand.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/725/original/2020-04-26_15-42-04.png?1587883347" class="editor-image img-responsive" data-smartkarma-image-id="129725"></figure><div class="content-caption">Source ♦ Japan Analytics</div><p>In the<strong> DETAIL</strong> below, we shall review the results, revisions and initial forecast announcements made on Friday by larger-cap companies.  The positive/neutral/negative balance for Friday's 28 results announcements was 13:1:14, and the net change in Results Score was -1. For the 47 revisions/forecasts, the split was 21:2:24 but the net change in Revision Score totalled -170. Of the eighteen companies declaring full-year results, only half made interim or annual forecasts for the current year. As we shall see below the 'worst' forecasts were from <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a>, <a href="https://www.smartkarma.com/entities/amano-corp" target="_blank" data-smartkarma-citation="entities:8135:1" rel="noopener">Amano (6436 JP)</a>, <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">ANA (9202 JP)</a>, and <a href="https://www.smartkarma.com/entities/denso-corp" target="_blank" data-smartkarma-citation="entities:18703:1" rel="noopener">Denso (6902 JP)</a> (see chart above). Large=caps with improved Revisions Scores were <a href="https://www.smartkarma.com/entities/mochida-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:3655:1" rel="noopener">Mochida Pharmaceutical (4534 JP)</a>, <a href="https://www.smartkarma.com/entities/okinawa-cellular-telephone" target="_blank" data-smartkarma-citation="entities:6517:1" rel="noopener">Okinawa Cellular Telephone (9436 JP)</a> and <a href="https://www.smartkarma.com/entities/acom-co-ltd" target="_blank" data-smartkarma-citation="entities:8897:1" rel="noopener">Acom (8572 JP)</a>. <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi (4507 JP)</a> and two other companies raised dividends; none cut their payouts.</p>

Source • Japan AnalyticsTHE WEDGE - Both Japanese equities and the $/¥ exchange rate have traded in a narrow range over the last two weeks. Undeterred, the Bank of Japan intervened through ETF purchases three times last week. In total, since the low of March 16th, the central bank has bought ETFs equivalent to 3.5% of market value, and have supported a 15% 29-day rally. As the markets consolidate in anticipation of the impending 'rendezvous with reality' in the form of quarterly earnings, the resolution of the 'wedge' formations above will be to the downside.Source • Japan AnalyticsCANARIES - As we noted in Friday's Results Review, interim forecasts are a useful 'canary' and, with some help from Fanuc (6954 JP), our composite Score is heading lower rapidly. A growing number of companies lacking Fanuc's candour are refusing to make initial full-year or interim forecasts this year leaving the market, and the sell-side, to 'fly blind'. The lack of foresight is resulting in a degree of misplaced optimism, as amply demonstrated by Friday's 7.5% gain in Omron (6645 JP) for 'beating' a six-month-old forecast for a mostly pre-COVID-19 year.     PERSISTENCE - Japan is still 'behind' the world and ahead of the rest of Asia in COVID-19 metrics - Marco Piani's excellent global timeline chart is attached as an Appendix in the DETAIL below. The number of confirmed new cases is persistent at around 300, of which, alarmingly, an increasing number are outside Tokyo, while the rolling 3-day number of deaths is moving more towards Europe than the rest of Asia. The northern island of Hokkaido which saw some of the earliest case clusters in Japan is experiencing a second wave of infections.  Nishimura, the Cabinet minister in charge of the response to COVID-19, is now in quarantine at home after one of his aides tested positive. Sunday has brought some welcome good news - the nationwide daily case count has declined to 140. Nevertheless, with just ten days until the proposed end of the states of emergency, at least one extension is likely, possibly until the end of May. Such a declaration is not yet discounted in the equity market.Source • NHKPREVALENCE - Although a lack of widespread testing biases this data, the detected rates of infection by age cohort (descending in the chart above) and sex (male blue/female red) reveal the consequences of Japan's version of social distancing. The highest rates of infection are amongst those that have to commute or come into contact with others, men between the ages of 20 and 50 and childless women in their twenties, many of whom work in hospitals or check-out counters. 10% of all COVID-19 cases in Japan are medical staff or patients who were infected nosocomially.  Testing is still a major bottleneck due to excessive fax-centric bureaucracy and reliance on only non-private institutions. Only 6,000 tests are being carried out every day, two-thirds of total capacity, and the results take one week to obtain. PLEASE DIE AT HOME - A number of those infected with COVID-19 who have been told to 'stay home' as the hospitals are full are now dying in situ or on the street. Some local governments are being forced to change tack. All newly-confirmed patients that cannot be accommodated in hospitals are to be moved to hotels with medical staff in attendance. However, there is now a severe shortage of such personnel. Hospitals in Tokyo are still turning away suspected COVID-19 patients. Aichi prefecture has resorted to offering 'subsidies' of up to ¥4 million to hospitals for accepting new patients.ANTI-SOCIAL BEHAVIOUR - Japan is not immune to anti-social behaviour at the worst of times. Cars with license plates from other prefectures have been vandalised when parked or tailgated or verbally-abused on the road. Child care facilities are turning away children of hospital staff for fear they may already be asymptomatic carriers, prompting many medical workers to quit their jobs. Some companies are requiring employees who are working from home to be monitored by video during working hours to ensure they are at their desks and not helping out with the housework.Source • SharpABE-'NO-MASKS'AND THE SHARP LOTTERY - The government has had to recall the small washable cloth masks that PM Abe planned to distribute two of per household due to mould, stains and insects being found in up to one-third of early batches. The roll-out of these much-criticised 'Abe masks' will be further delayed. Meanwhile, demand for Sharp (6753 JP)'s newly-manufactured higher quality single-use masks so overwhelmed the company's website, that Sharp has decided to hold a lottery as a way of rationing demand.Source ♦ Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made on Friday by larger-cap companies.  The positive/neutral/negative balance for Friday's 28 results announcements was 13:1:14, and the net change in Results Score was -1. For the 47 revisions/forecasts, the split was 21:2:24 but the net change in Revision Score totalled -170. Of the eighteen companies declaring full-year results, only half made interim or annual forecasts for the current year. As we shall see below the 'worst' forecasts were from Fanuc (6954 JP), Amano (6436 JP), ANA (9202 JP), and Denso (6902 JP) (see chart above). Large=caps with improved Revisions Scores were Mochida Pharmaceutical (4534 JP), Okinawa Cellular Telephone (9436 JP) and Acom (8572 JP). Shionogi (4507 JP) and two other companies raised dividends; none cut their payouts.

🇯🇵 JAPAN MARKET (& COVID-19) UPDATE 26th April - Thin End of the Wedge

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Since our last Insight, the Nikkei225 2020 dividend futures crashed along with the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" rel="noopener" data-smartkarma-citation="entities:22909:1">Nikkei 225 (NKY INDEX)</a> but then recovered sharply as fundamentals came to the fore and investors reassessed the likelihood of large scale dividend cancellations similar to those announced in Europe.</p><p>In this Insight, we look at how the dividend futures have moved in the last few weeks and estimate fair values for the Nikkei225 2020 dividend futures under different scenarios.</p><p>Given the strong rally in the dividend futures, the risk reward ratio at current prices is not as compelling as it was when we wrote our <a href="https://www.smartkarma.com/insights/nikkei-225-dividend-futures-buy-the-selloff" target="_blank" rel="noopener">previous Insight</a>. We would recommend trimming long positions as the market moves higher as the easy gains have been made and upside looks limited from here.</p>

Since our last Insight, the Nikkei225 2020 dividend futures crashed along with the Nikkei 225 (NKY INDEX) but then recovered sharply as fundamentals came to the fore and investors reassessed the likelihood of large scale dividend cancellations similar to those announced in Europe.In this Insight, we look at how the dividend futures have moved in the last few weeks and estimate fair values for the Nikkei225 2020 dividend futures under different scenarios.Given the strong rally in the dividend futures, the risk reward ratio at current prices is not as compelling as it was when we wrote our previous Insight. We would recommend trimming long positions as the market moves higher as the easy gains have been made and upside looks limited from here.

Nikkei225 Dividend Futures: The Easy Gains Have Been Made

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>As noted in the last insight about <a href="https://www.smartkarma.com/insights/the-gpif-s-new-policy-mix" target="_blank" data-smartkarma-citation="insights:38000" rel="noopener">The GPIF's New Policy Mix</a> (and its preceding <a href="https://www.smartkarma.com/insights/gpif-policy-mix-changes-ride-to-global-risk-rescue" target="_blank" data-smartkarma-citation="insights:37770" rel="noopener">GPIF Policy Mix Changes Ride to Global Risk Rescue</a>), the GPIF has changed its policy mix.</p><p>Apparently, going to <em>exactly</em><em>25% each</em>, <em>plus or minus a fair bit</em>, on domestic bonds, foreign bonds, domestic equities, and foreign equities, provides the lowest risk profile while reaching the GPIF's real investment rate of return target of 1.7%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/617/original/Screenshot%202020-04-12%20at%206.31.04%20PM.png?1586687503" class="editor-image img-responsive" data-smartkarma-image-id="127617"></figure><div class="content-highlight">
<p>This is the target for the future. A target which it will meet. With 50%, or roughly 40% to up to 60+% of notional, and far more than that of mark-to-market risk, in foreign currency.</p>
<p>And that is the lowest risk portfolio tested. </p>
<p>How do we know they will meet that target? Because they backtested the policy mix over the past 25yrs post-bubble returns to March 2019. Using annual data. It was also tested against the last 34yrs of returns. Using annual data. And everyone knows that using 25-34 data points over the past 25-34 years is likely to provide near certainty of what will happen to yen returns in foreign currency assets. [narrator: no, it won't].</p>
<p>As of the start of this new policy on 1 April, the yen-hedged 10yr US Treasury rate was about -0.6% rather than the average 4.1% yield over 25yrs less a yen hedge to get to 2.6%. </p>
<p>The current prospective yen-hedged return is 3.2% below the bogey rate of 2.6% in yen. To get back to a yen-hedged rate of 2.6%, the entire GPIF portfolio has to take a loss of something like 7-8% at the policy mix of 25% foreign bonds. Either that or they can hold on to the bonds they have and expect USD/JPY to rise 2% a year to get to ¥130 to the dollar by March 2030.</p>
<p>But that is the base assumption. USD/JPY has to go up 2% a year to make this work.</p>
<p>Practically speaking, of course, that might not be required. If USD/yen rose and bond yields rose in the interim, the domestic equities portfolio might outperform the expected 5.6% annual return and make up for the interim losses, and income from the equity portfolio could be used to reinvest a larger amount at higher yields. The assumed correlation between the two assets in yen terms is close to zero. </p>
<p>But all that requires aggressive rebalancing when the yen-denominated asset portfolios get out of whack with the policy mix rates. </p>
</div><p>All this should tell you is that the policy mix as it was when they decided this in March was substantially different than the history which informed the decision (markets move, who'da thunk?), and the result is that to match that return going forward, the yen has to weaken substantially, and consistently, and effectively permanently. That's the base investment case.</p><h2>The Other News Out From the GPIF is About ESG</h2><p>The <a href="https://www.gpif.go.jp/topics/Adoption%20of%20New%20Policy%20Portfolio_Jp_details.pdf" target="_blank" rel="noopener">presentation</a> (only in Japanese) about the change in policy makes considerable mention of the concept of ESG and stewardship, and suggests an interesting breakdown of what stewardship means for passive investing and active investing conducted by the GPIF's sub-managers. The minutes of the last several Investment Committee and Governors' meetings also refer quite a lot to ESG. </p><p>The presentation and minutes also talk quite interestingly about index construction and engagement with index providers. </p><p>The result is an increased emphasis on </p><h2>And We Have March Data And May Glean What GPIF Did in FYQ4</h2><p>Late last week, the Japanese Ministry of Finance reported its survey of large asset managers and trust banks of the flows in international securities, and the TSE reported the weekly and therefore March totals for trust bank activity in equities.</p><p>The picture painted may tell us something remarkable about what happened in the last quarter. </p><p>Much more below.</p>

As noted in the last insight about The GPIF's New Policy Mix (and its preceding GPIF Policy Mix Changes Ride to Global Risk Rescue), the GPIF has changed its policy mix.Apparently, going to exactly25% each, plus or minus a fair bit, on domestic bonds, foreign bonds, domestic equities, and foreign equities, provides the lowest risk profile while reaching the GPIF's real investment rate of return target of 1.7%.
This is the target for the future. A target which it will meet. With 50%, or roughly 40% to up to 60+% of notional, and far more than that of mark-to-market risk, in foreign currency.
And that is the lowest risk portfolio tested. 
How do we know they will meet that target? Because they backtested the policy mix over the past 25yrs post-bubble returns to March 2019. Using annual data. It was also tested against the last 34yrs of returns. Using annual data. And everyone knows that using 25-34 data points over the past 25-34 years is likely to provide near certainty of what will happen to yen returns in foreign currency assets. [narrator: no, it won't].
As of the start of this new policy on 1 April, the yen-hedged 10yr US Treasury rate was about -0.6% rather than the average 4.1% yield over 25yrs less a yen hedge to get to 2.6%. 
The current prospective yen-hedged return is 3.2% below the bogey rate of 2.6% in yen. To get back to a yen-hedged rate of 2.6%, the entire GPIF portfolio has to take a loss of something like 7-8% at the policy mix of 25% foreign bonds. Either that or they can hold on to the bonds they have and expect USD/JPY to rise 2% a year to get to ¥130 to the dollar by March 2030.
But that is the base assumption. USD/JPY has to go up 2% a year to make this work.
Practically speaking, of course, that might not be required. If USD/yen rose and bond yields rose in the interim, the domestic equities portfolio might outperform the expected 5.6% annual return and make up for the interim losses, and income from the equity portfolio could be used to reinvest a larger amount at higher yields. The assumed correlation between the two assets in yen terms is close to zero. 
But all that requires aggressive rebalancing when the yen-denominated asset portfolios get out of whack with the policy mix rates. 
All this should tell you is that the policy mix as it was when they decided this in March was substantially different than the history which informed the decision (markets move, who'da thunk?), and the result is that to match that return going forward, the yen has to weaken substantially, and consistently, and effectively permanently. That's the base investment case.The Other News Out From the GPIF is About ESGThe presentation (only in Japanese) about the change in policy makes considerable mention of the concept of ESG and stewardship, and suggests an interesting breakdown of what stewardship means for passive investing and active investing conducted by the GPIF's sub-managers. The minutes of the last several Investment Committee and Governors' meetings also refer quite a lot to ESG. The presentation and minutes also talk quite interestingly about index construction and engagement with index providers. The result is an increased emphasis on And We Have March Data And May Glean What GPIF Did in FYQ4Late last week, the Japanese Ministry of Finance reported its survey of large asset managers and trust banks of the flows in international securities, and the TSE reported the weekly and therefore March totals for trust bank activity in equities.The picture painted may tell us something remarkable about what happened in the last quarter. Much more below.

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Equity Bottom-Up

<p>Yaskawa reported results for FY02/20 last Friday kicking off the earnings season for the FA sector. With its FY ending one month earlier than other players, investors and analysts were keen to get some sort of a read on the real impact of COVID-19 on the sector. However, while the company beat subdued consensus numbers, particularly at the OP level, and sounded optimistic about recovering orders, there was nevertheless significant uncertainty and it would be difficult take an overly bullish stance here. Results and orders appear to be bottoming and we believe consensus is too low for FY02/21, but with very rich valuations prevailing, we believe the market is also significantly above consensus and could be pricing in too strong of a recovery, creating downside risks.</p>

Yaskawa reported results for FY02/20 last Friday kicking off the earnings season for the FA sector. With its FY ending one month earlier than other players, investors and analysts were keen to get some sort of a read on the real impact of COVID-19 on the sector. However, while the company beat subdued consensus numbers, particularly at the OP level, and sounded optimistic about recovering orders, there was nevertheless significant uncertainty and it would be difficult take an overly bullish stance here. Results and orders appear to be bottoming and we believe consensus is too low for FY02/21, but with very rich valuations prevailing, we believe the market is also significantly above consensus and could be pricing in too strong of a recovery, creating downside risks.

Yaskawa – First Peek at FA Earnings Cycle Suggests Recovery but One Which Won’t Justify Valuations

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/000/125/889/original/2020-04-01_12-59-11.png?1585713567" class="editor-image img-responsive" data-smartkarma-image-id="125889"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>DIVIDENDS AT RISK</strong> - As noted in our daily Results &amp; Revisions Updates in the last few days, Japanese companies are starting to shore up their cash flow but cutting or eliminating their dividends. Following <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC (5 HK) </a>and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a> moves on April 1st, a wave of similar moves is expected in Japan. Although dividends are thought to be very 'sticky' in this market,  on average,  of the 75% of non-financial companies that pay dividends, 14% reduce their payouts each year. In FY2009 and FY2010, this ratio rose to one-third.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/899/original/2020-04-01_13-47-18.png?1585716458" class="editor-image img-responsive" data-smartkarma-image-id="125899"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>30% HAIRCUT</strong> - The 'stickiness' of Japanese dividends is clear from the trends in absolute values. The total amount of cash dividends paid by non-financial companies declined by 30% from 2008 to 2010 or by ¥1.8 trillion. Since the 2010 'low', total cash dividends paid by these companies have increased by 168% to ¥11.8 trillion, a 'trailing yield' of 2.4%. A 30% dividend haircut to ¥8.3 trillion would reduce the yield on current market cap to 1.7%, slightly above the 2010 low of 1.63%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/905/original/2020-04-07_13-29-26.png?1586233784" class="editor-image img-responsive" data-smartkarma-image-id="126905"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>WHO'S CUTTING NEXT?</strong> - Some serial dividend 'cutters', like <a href="https://www.smartkarma.com/entities/nipro-corp" target="_blank" data-smartkarma-citation="entities:18346:1" rel="noopener">Nipro (8086 JP)</a> above, have already announced a cut for the fiscal year just ended. In the<strong> DETAIL</strong> section below, we shall attempt to highlight those larger (Market Cap &gt; ¥50b) companies with the greatest risk of having to cut their dividends.</p>

Source • Japan AnalyticsDIVIDENDS AT RISK - As noted in our daily Results &amp; Revisions Updates in the last few days, Japanese companies are starting to shore up their cash flow but cutting or eliminating their dividends. Following HSBC (5 HK) and Standard Chartered (STAN LN) moves on April 1st, a wave of similar moves is expected in Japan. Although dividends are thought to be very 'sticky' in this market,  on average,  of the 75% of non-financial companies that pay dividends, 14% reduce their payouts each year. In FY2009 and FY2010, this ratio rose to one-third.Source • Japan Analytics30% HAIRCUT - The 'stickiness' of Japanese dividends is clear from the trends in absolute values. The total amount of cash dividends paid by non-financial companies declined by 30% from 2008 to 2010 or by ¥1.8 trillion. Since the 2010 'low', total cash dividends paid by these companies have increased by 168% to ¥11.8 trillion, a 'trailing yield' of 2.4%. A 30% dividend haircut to ¥8.3 trillion would reduce the yield on current market cap to 1.7%, slightly above the 2010 low of 1.63%.Source • Japan AnalyticsWHO'S CUTTING NEXT? - Some serial dividend 'cutters', like Nipro (8086 JP) above, have already announced a cut for the fiscal year just ended. In the DETAIL section below, we shall attempt to highlight those larger (Market Cap &gt; ¥50b) companies with the greatest risk of having to cut their dividends.

🇯🇵 JAPAN • Dividends At Risk - The Serial 'Cutters'

Japan

FANUC CORPORATION manufactures factory automation (FA) systems and equipments, and robots. The Company's products include computerized numerically-controlled (CNC) equipment, servo motors, laser systems, industrial robots, wire-cut electric discharge machines, and CNC drill.  Fanuc participates in a joint venture with General Electric in the FA field.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Fanuc Corp (6954 JP)

🇯🇵 JAPAN MARKET (& COVID-19) UPDATE 26th April - Thin End of the Wedge

THE WEDGE - Both Japanese equities and the $/¥ exchange rate have traded in a narrow range over the last two weeks. Undeterred, the Bank of Japan...

Campbell Gunn

Nikkei225 Dividend Futures: The Easy Gains Have Been Made

Since our last Insight, the Nikkei225 2020 dividend futures crashed along with the Nikkei 225 (NKY INDEX) but then recovered sharply as...

Brian Freitas

Recent GPIF Moves - Rebalancing & ESG

As noted in the last insight about The GPIF's New Policy Mix (and its preceding GPIF Policy Mix Changes Ride to Global Risk Rescue), the GPIF has...

Travis Lundy

Yaskawa – First Peek at FA Earnings Cycle Suggests Recovery but One Which Won’t Justify Valuations

Yaskawa reported results for FY02/20 last Friday kicking off the earnings season for the FA sector. With its FY ending one month earlier than other...

Mio Kato

🇯🇵 JAPAN • Dividends At Risk - The Serial 'Cutters'

DIVIDENDS AT RISK - As noted in our daily Results & Revisions Updates in the last few days, Japanese companies are starting to shore up their...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)