'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

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/454/original/2020-04-18_16-16-49.png?1587194226" class="editor-image img-responsive" data-smartkarma-image-id="128454"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>MARKING TIME</strong> - Japanse equities were becalmed last week, rising by 0.84%, while the Yen traded at 107 all week. The Bank of Japan bought ETFs on Wednesday and Thursday despite the relative calm and are on a path for April to equal the total purchases made in March. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/455/original/2020-04-18_17-43-44.png?1587199447" class="editor-image img-responsive" data-smartkarma-image-id="128455"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>MARKING MULTIPLES</strong> - As we have been covering in our daily Results &amp; Revisions updates, forward earnings continue to decline gradually. As previously noted, the market multiple will rise over the next month as full-year forecasts for FY2021 are announced to at least the early 2020 peak of 17.6 times. This adjustment process will be complicated by a lack of initial forecasts from many leading companies and by a delay in the publication of annual <em>yuho</em> audited financial statements until the late summer. 'Robust' analysis will be at a premium.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/651/original/File%202020-04-20%204%2023%2024.jpeg?1587324271" class="editor-image img-responsive" data-smartkarma-image-id="128651"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/652/original/File%202020-04-20%204%2024%2019.jpeg?1587324282" class="editor-image img-responsive" data-smartkarma-image-id="128652"></figure><p></p><div class="content-caption">Source • ourworldindata.org</div><p><strong>COVID CASE COUNT</strong> - Japan's COVID-19 daily case-count has trended down this week compared to the weel before and is now on a par with Sweden and Singapore. Daily fatalities are averaging double figures as this lagging statistics reflects the higher case count of two weeks ago and are still within the East Asian 'range' of 0-10 a day. New case counts of below 100 and a declining trend, as is the case in South Korea, Denmark and Austria will be required by the end of Golden Week on May 6th for Japan to consider any relaxation of its now nationwide 'state of emergency'. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/558/original/File%202020-04-19%2016%2028%2027.jpeg?1587281926" class="editor-image img-responsive" data-smartkarma-image-id="128558"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/559/original/File%202020-04-19%2016%2023%2014.jpeg?1587281952" class="editor-image img-responsive" data-smartkarma-image-id="128559"></figure><div class="content-caption">Source • ourworldindata.org</div><p><strong>JAPAN'S TESTING VACUUM</strong> - We have noted the lack of testing in Japan in an earlier <a href="https://www.smartkarma.com/insights/japan-market-update-hit-the-boj-bid-and-wait-for-the-absolute-value-opportunity" target="_blank" data-smartkarma-citation="insights:37670" rel="noopener">Insight</a> and the two charts above from Oxford's Global Change Data Lab highlights Japan's outlier status in this regard and the implications for confirmed case counts and confirmed deaths. This deficiency has led many data scientists to study excess mortality rates. At present, there is insufficient data from the Health Ministry in Japan to make any valid comparisons. Based on other countries, Japan's excess mortality will likely price to be slightly higher for the over 65s and lower for everyone else. In any case, a massive testing capability will form a key component of any viable exit strategy.     </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/479/original/File%202020-04-19%206%2024%2053.jpeg?1587245112" class="editor-image img-responsive" data-smartkarma-image-id="128479"></figure><div class="content-caption">Source • stopcovid19.jp</div><p><strong>OVERSHOOT</strong> - Unfortunately for patients and the government, hospitals are now full in many prefectures. Central Tokyo hospitals are turning away patients requiring ambulances to take patients to outlying parts of the prefecture - although this situation is not unusual in normal times. Despite ample time to prepare, the government has failed to provide for the 'overshoot' that they had been warning the public it was necessary to avoid. Japan also has a lower ratio of intensive care beds, (5) per 100,000 people, than many other developed countries. The previous policy of hospitalising every case, however mild, has been reversed and local governments have now requisitioned 210,000 hotel rooms to house those not in need of urgent medical intervention. While Japan's COVID-19 strategy has, so far, followed the less economically-damaging Swedish model (see below), a failure to address the hospital overshoot risks the country being forced to follow the UK's 'u-turn' into total lockdown from which exit strategies are much harder. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/650/original/2020-04-20_04-02-00.png?1587322973" class="editor-image img-responsive" data-smartkarma-image-id="128650"></figure><div class="content-caption">Source • Tokyo Metropolitan Government</div><p><strong>PEAKING OUT?</strong> On Sunday, Tokyo only 107 new cases, the lowest Sunday total for three weeks and the first decline. Tokyo now has over 3,000 cases out of a population of almost 14 million. The rate of doubling is now decelerating from one week to two weeks. Meanwhile, transit through major railway stations has declined by 70-80% across Japan. A lowering of new cases next week will be crucial to keep the hospitals from overflowing and the Prime Minister's reputation from falling further.</p><p><strong>FALLOUT</strong> - PM Abe's political capital is another casualty of this disease. It has emerged that his coalition partner the lay-Buddhist Komeito party threatened to walk out if the cash-for-all policy was not implemented requiring Abe to amend a previously-agreed budget bill much to the fury of the Ministry of Finance. The latter was able to require an application process as a means of limiting the amounts dispersed. However, in a bow to the changing circumstance, this process can be conducted online without, it seems, the need for in-person <em>hanko</em> certification. An additional complication is that Abe has 'fallen out' with his main bureaucratic 'fixer' and the main conduit with Komeito, Chief Cabinet Secretary Suga. Abe's poll ratings will probably never recover, and only his long-cherished desire to open the Tokyo Olympics in July 20121 will keep him in office. As will be true in many countries, the COVID-19 policy post mortems will be brutal and fatal for many previously Teflon-like political careers.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/486/original/File%202020-04-18%2013%2054%2022.jpeg?1587246944" class="editor-image img-responsive" data-smartkarma-image-id="128486"></figure><div class="content-caption">Source • Agoop</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/488/original/File%202020-04-18%2013%2053%2001.jpeg?1587247186" class="editor-image img-responsive" data-smartkarma-image-id="128488"></figure><div class="content-caption">Source • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward   Orange Line = Concentration of people at 11 pm</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/490/original/File%202020-04-18%2014%2000%2004.jpeg?1587247628" class="editor-image img-responsive" data-smartkarma-image-id="128490"></figure><div class="content-caption">Source • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward  Red Line = Population earning more than ¥15m a year</div><p><strong>HOTSPOTS &amp; FAT CATS</strong> - Some support for the government's policy of shutting down Tokyo's nightlife comes from data which correlates case count per Tokyo ward and population clusters in each area at 11 pm.  The correlation is much higher than both population levels and public transport transit through each ward. The second highest correlation was with income levels, suggesting that Tokyo' rich have a greater tendency to frequent bars, restaurants and other forms of evening entertainment, while no doubt considering themselves immune. This correlation has been anecdotally confirmed by the growing number of figures from the media and entertainment world who have contracted the disease and bears out the Tokyo Metropolitan Government's focus on avoiding the 3 'C's - <strong>C</strong>ongregations <strong>C</strong>onversing in <strong>C</strong>onfined spaces. The plug has been pulled on Tokyo's '<em>mizushobai'</em> or 'water trade'.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/663/original/File%202020-04-20%205%2020%2010.jpeg?1587327650" class="editor-image img-responsive" data-smartkarma-image-id="128663"></figure><div class="content-caption">Source • Johns Hopkins CSSE</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/478/original/2020-04-19_06-16-22.png?1587244624" class="editor-image img-responsive" data-smartkarma-image-id="128478"></figure><div class="content-caption">Source • LockdownTV</div><p><strong>PROF GIESECKE &amp; THE SWEDISH MODEL</strong> - Lastly, this <a href="https://youtu.be/bfN2JWifLCY" target="_blank" rel="noopener">video</a> of an interview with retired Swedish epidemiologist, Professor Johan Giesecke, provides an update on the policy options that governments have faced in their responses to COVID-19, the background to Sweden's policy and the difficulties of exiting from lockdown strategies. A summary of his talk is as follows:-</p><blockquote>
<p>Lockdown policies are not evidence-based</p>
<p>The correct policy is to protect the old and the frail only - this will eventually lead to herd immunity as a by-product - the initial UK response, which was similar to Sweden's was better  - before they made a 180 degree U-turn</p>
<p>The UK's Imperial College paper was not very good and he has never seen an unpublished paper have so much policy impact - the paper was  too pessimistic and any such models are a dubious basis for public policy</p>
<p>The flattening of the curve is due to the most vulnerable dying first as much as the lockdown policy</p>
<p>The outcomes will eventually be similar for all countries regardless of policy pursued</p>
<p>Covid-19 is a mild disease similar to the flu, and it was the novelty of the disease that scared people - the fatality rate of Covid-19 is the region of 0.1%</p>
<p>At least 50% of the population will be shown to have already had the disease when mass antibody testing becomes available - achieving 'herd immunity'</p>
</blockquote><p>In the <strong>DETAIL </strong>below, we shall explore some of the emerging themes for the post-COVID-19 world, review the results, revisions and initial forecast announcements made on Friday and, finally, look at our lists the Moving Average 'Outliers'.  The positive/neutral/negative balance for Friday's three results announcements was 1:0:2. For the 20 revisions/forecasts, the split was 7:1:12 - although two of the positive outcomes were securities brokers making initial 'forecasts' of a year-on-year return to profitability after the full-year results have been finalised. Peer Groups revising down included <strong>Advertising Services</strong>, <strong>Apparel &amp; Footwear</strong>, <strong>Retail-Apparel &amp; Footwear</strong>, <strong>Hotels &amp; Resorts</strong>, <strong>Employment &amp; Staffing</strong>, and<strong> Restaurants</strong>. Upward revisions were seen in<strong> Retail-Food &amp; Drink</strong>, <strong>Personal Products</strong>, and<strong> Public Relations</strong>.</p>

Source • Japan AnalyticsMARKING TIME - Japanse equities were becalmed last week, rising by 0.84%, while the Yen traded at 107 all week. The Bank of Japan bought ETFs on Wednesday and Thursday despite the relative calm and are on a path for April to equal the total purchases made in March. Source • Japan AnalyticsMARKING MULTIPLES - As we have been covering in our daily Results &amp; Revisions updates, forward earnings continue to decline gradually. As previously noted, the market multiple will rise over the next month as full-year forecasts for FY2021 are announced to at least the early 2020 peak of 17.6 times. This adjustment process will be complicated by a lack of initial forecasts from many leading companies and by a delay in the publication of annual yuho audited financial statements until the late summer. 'Robust' analysis will be at a premium.Source • ourworldindata.orgCOVID CASE COUNT - Japan's COVID-19 daily case-count has trended down this week compared to the weel before and is now on a par with Sweden and Singapore. Daily fatalities are averaging double figures as this lagging statistics reflects the higher case count of two weeks ago and are still within the East Asian 'range' of 0-10 a day. New case counts of below 100 and a declining trend, as is the case in South Korea, Denmark and Austria will be required by the end of Golden Week on May 6th for Japan to consider any relaxation of its now nationwide 'state of emergency'. Source • ourworldindata.orgJAPAN'S TESTING VACUUM - We have noted the lack of testing in Japan in an earlier Insight and the two charts above from Oxford's Global Change Data Lab highlights Japan's outlier status in this regard and the implications for confirmed case counts and confirmed deaths. This deficiency has led many data scientists to study excess mortality rates. At present, there is insufficient data from the Health Ministry in Japan to make any valid comparisons. Based on other countries, Japan's excess mortality will likely price to be slightly higher for the over 65s and lower for everyone else. In any case, a massive testing capability will form a key component of any viable exit strategy.     Source • stopcovid19.jpOVERSHOOT - Unfortunately for patients and the government, hospitals are now full in many prefectures. Central Tokyo hospitals are turning away patients requiring ambulances to take patients to outlying parts of the prefecture - although this situation is not unusual in normal times. Despite ample time to prepare, the government has failed to provide for the 'overshoot' that they had been warning the public it was necessary to avoid. Japan also has a lower ratio of intensive care beds, (5) per 100,000 people, than many other developed countries. The previous policy of hospitalising every case, however mild, has been reversed and local governments have now requisitioned 210,000 hotel rooms to house those not in need of urgent medical intervention. While Japan's COVID-19 strategy has, so far, followed the less economically-damaging Swedish model (see below), a failure to address the hospital overshoot risks the country being forced to follow the UK's 'u-turn' into total lockdown from which exit strategies are much harder. Source • Tokyo Metropolitan GovernmentPEAKING OUT? On Sunday, Tokyo only 107 new cases, the lowest Sunday total for three weeks and the first decline. Tokyo now has over 3,000 cases out of a population of almost 14 million. The rate of doubling is now decelerating from one week to two weeks. Meanwhile, transit through major railway stations has declined by 70-80% across Japan. A lowering of new cases next week will be crucial to keep the hospitals from overflowing and the Prime Minister's reputation from falling further.FALLOUT - PM Abe's political capital is another casualty of this disease. It has emerged that his coalition partner the lay-Buddhist Komeito party threatened to walk out if the cash-for-all policy was not implemented requiring Abe to amend a previously-agreed budget bill much to the fury of the Ministry of Finance. The latter was able to require an application process as a means of limiting the amounts dispersed. However, in a bow to the changing circumstance, this process can be conducted online without, it seems, the need for in-person hanko certification. An additional complication is that Abe has 'fallen out' with his main bureaucratic 'fixer' and the main conduit with Komeito, Chief Cabinet Secretary Suga. Abe's poll ratings will probably never recover, and only his long-cherished desire to open the Tokyo Olympics in July 20121 will keep him in office. As will be true in many countries, the COVID-19 policy post mortems will be brutal and fatal for many previously Teflon-like political careers.Source • AgoopSource • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward   Orange Line = Concentration of people at 11 pmSource • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward  Red Line = Population earning more than ¥15m a yearHOTSPOTS &amp; FAT CATS - Some support for the government's policy of shutting down Tokyo's nightlife comes from data which correlates case count per Tokyo ward and population clusters in each area at 11 pm.  The correlation is much higher than both population levels and public transport transit through each ward. The second highest correlation was with income levels, suggesting that Tokyo' rich have a greater tendency to frequent bars, restaurants and other forms of evening entertainment, while no doubt considering themselves immune. This correlation has been anecdotally confirmed by the growing number of figures from the media and entertainment world who have contracted the disease and bears out the Tokyo Metropolitan Government's focus on avoiding the 3 'C's - Congregations Conversing in Confined spaces. The plug has been pulled on Tokyo's 'mizushobai' or 'water trade'.Source • Johns Hopkins CSSESource • LockdownTVPROF GIESECKE &amp; THE SWEDISH MODEL - Lastly, this video of an interview with retired Swedish epidemiologist, Professor Johan Giesecke, provides an update on the policy options that governments have faced in their responses to COVID-19, the background to Sweden's policy and the difficulties of exiting from lockdown strategies. A summary of his talk is as follows:-
Lockdown policies are not evidence-based
The correct policy is to protect the old and the frail only - this will eventually lead to herd immunity as a by-product - the initial UK response, which was similar to Sweden's was better  - before they made a 180 degree U-turn
The UK's Imperial College paper was not very good and he has never seen an unpublished paper have so much policy impact - the paper was  too pessimistic and any such models are a dubious basis for public policy
The flattening of the curve is due to the most vulnerable dying first as much as the lockdown policy
The outcomes will eventually be similar for all countries regardless of policy pursued
Covid-19 is a mild disease similar to the flu, and it was the novelty of the disease that scared people - the fatality rate of Covid-19 is the region of 0.1%
At least 50% of the population will be shown to have already had the disease when mass antibody testing becomes available - achieving 'herd immunity'
In the DETAIL below, we shall explore some of the emerging themes for the post-COVID-19 world, review the results, revisions and initial forecast announcements made on Friday and, finally, look at our lists the Moving Average 'Outliers'.  The positive/neutral/negative balance for Friday's three results announcements was 1:0:2. For the 20 revisions/forecasts, the split was 7:1:12 - although two of the positive outcomes were securities brokers making initial 'forecasts' of a year-on-year return to profitability after the full-year results have been finalised. Peer Groups revising down included Advertising Services, Apparel &amp; Footwear, Retail-Apparel &amp; Footwear, Hotels &amp; Resorts, Employment &amp; Staffing, and Restaurants. Upward revisions were seen in Retail-Food &amp; Drink, Personal Products, and Public Relations.

🇯🇵 JAPAN MARKET (& COVID-19) UPDATE 19th April - Overshoot

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

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<p>The GPIF is the world's largest pension fund at what was $1.6 trillion-plus at the end of December 2019. </p><p>The management of the GPIF has made remarkable strides in recent years, moving towards market targets for returns of all assets (no more FILP bonds), creating a win-win profitability structure for active managers on multi-year mandates (up to five to seven years it seems), and demanding accountability on stewardship policies and efforts. </p><p>In March 2010, the GPIF lowered its domestic bond portfolio bogey from 67% to 60% (which was good because it was already there),  and raised its domestic equity, foreign bond, and foreign equity allocation mix midpoints to 12%/11%/12% from 11%/8%/9%. Short Term Assets were set at 5%. </p><p>In June 2013, they realized they needed to be more aggressive, and so the GPIF spent more than a year studying the problem, having experts in, looking at allocation mixes and trying to be more professional about assessing their liability profile and curve, and decided in October 2014 to implement a much different mix, moving domestic bonds to 35% ±10%, domestic equities to 25% ±9%, foreign bonds to 15% ±4%, and foreign equities to 25% ±8%. There was no bogey for Short Term Assets, but that was assumed to be wrapped up in the domestic bonds portion as a concept.</p><p>That meant buying equities, and they did.</p><p>They had already been buying and by the time they announced the new policy in October 2014 officially, they had already gone through the old limits on domestic equities and were at 18.2% (the old upper limit was 18.0%). It took them until March 2015 to get to 22%, and by June they were at 23.4%. </p><p>Basically, they then let it ride, with some small changes here and there. The big changes were constant reductions in the domestic bond allocation. However in FY15 (year to March 2016) there was an episode of equity buying. That is probably something those interested in flows should study now. </p><p>The GPIF is currently said to be in the process of conducting an Investment Policy Review. The lead-up to this has seen a number of changes which hint at what could come.</p><ol>
<li>
<strong>The GPIF has become very ESG-focussed.</strong> Some of that is the G portion where they talk about being long-term investors, and they have made it mandatory for their investment managers to have a stewardship policy and report on how they execute that policy. They are also looking very much at the longer-term, and CIO Mizuno has blasted short-sellers and any number of other market participants for being short-term (I had issues with a bunch of the comments reported in the FT so got a <a href="https://ftalphaville.ft.com/2020/01/14/1579000419000/The-GPIF-and-the-complexity-of-stewardship/" target="_blank" rel="noopener">letter to Alphaville</a> published - Thanks Jamie!).</li>
<li><strong>The GPIF has started looking at real estate.</strong></li>
<li>
<strong>The GPIF has decided that foreign credit which is yen-hedged can be put into the domestic bonds allocation bucket.</strong> This means a higher allocation to foreign issuer risk than the old limit.</li>
<li>
<strong>The GPIF has stopped lending stocks.</strong> This reduces fee income to passive portfolios (foreign equity, as domestic equity lending has never been done, or at least not in many, many years) but it means more pressure on company management.</li>
<li>
<strong>The GPIF has changed the way contracts work for active managers.</strong> The base concept, according to interviews and articles, is that the active manager gets the same very low management fee on AUM as a passive manager does, but the active manager shares in the upside over the life of the contract, which will be "one market cycle" (i.e. five years, or seven years, or whatever they settle on with the GPIF). This should, ceteris paribus, lead to further outperformance. </li>
</ol><p>All of these things would, in my mind, point to a higher domestic equity allocation, a higher foreign bond allocation, and a shift to more active management and less passive management in domestic equities (last year the split was 90% passive 10% active). </p><p>But there are shorter-term factors investors should be looking at. </p><p>More discussion below.</p>

The GPIF is the world's largest pension fund at what was $1.6 trillion-plus at the end of December 2019. The management of the GPIF has made remarkable strides in recent years, moving towards market targets for returns of all assets (no more FILP bonds), creating a win-win profitability structure for active managers on multi-year mandates (up to five to seven years it seems), and demanding accountability on stewardship policies and efforts. In March 2010, the GPIF lowered its domestic bond portfolio bogey from 67% to 60% (which was good because it was already there),  and raised its domestic equity, foreign bond, and foreign equity allocation mix midpoints to 12%/11%/12% from 11%/8%/9%. Short Term Assets were set at 5%. In June 2013, they realized they needed to be more aggressive, and so the GPIF spent more than a year studying the problem, having experts in, looking at allocation mixes and trying to be more professional about assessing their liability profile and curve, and decided in October 2014 to implement a much different mix, moving domestic bonds to 35% ±10%, domestic equities to 25% ±9%, foreign bonds to 15% ±4%, and foreign equities to 25% ±8%. There was no bogey for Short Term Assets, but that was assumed to be wrapped up in the domestic bonds portion as a concept.That meant buying equities, and they did.They had already been buying and by the time they announced the new policy in October 2014 officially, they had already gone through the old limits on domestic equities and were at 18.2% (the old upper limit was 18.0%). It took them until March 2015 to get to 22%, and by June they were at 23.4%. Basically, they then let it ride, with some small changes here and there. The big changes were constant reductions in the domestic bond allocation. However in FY15 (year to March 2016) there was an episode of equity buying. That is probably something those interested in flows should study now. The GPIF is currently said to be in the process of conducting an Investment Policy Review. The lead-up to this has seen a number of changes which hint at what could come.

The GPIF has become very ESG-focussed. Some of that is the G portion where they talk about being long-term investors, and they have made it mandatory for their investment managers to have a stewardship policy and report on how they execute that policy. They are also looking very much at the longer-term, and CIO Mizuno has blasted short-sellers and any number of other market participants for being short-term (I had issues with a bunch of the comments reported in the FT so got a letter to Alphaville published - Thanks Jamie!).
The GPIF has started looking at real estate.

The GPIF has decided that foreign credit which is yen-hedged can be put into the domestic bonds allocation bucket. This means a higher allocation to foreign issuer risk than the old limit.

The GPIF has stopped lending stocks. This reduces fee income to passive portfolios (foreign equity, as domestic equity lending has never been done, or at least not in many, many years) but it means more pressure on company management.

The GPIF has changed the way contracts work for active managers. The base concept, according to interviews and articles, is that the active manager gets the same very low management fee on AUM as a passive manager does, but the active manager shares in the upside over the life of the contract, which will be "one market cycle" (i.e. five years, or seven years, or whatever they settle on with the GPIF). This should, ceteris paribus, lead to further outperformance. 
All of these things would, in my mind, point to a higher domestic equity allocation, a higher foreign bond allocation, and a shift to more active management and less passive management in domestic equities (last year the split was 90% passive 10% active). But there are shorter-term factors investors should be looking at. More discussion below.

<div><p>Last year was Tuesday and Wednesday. The two years before were too. The year before that was Monday and Tuesday. Five years ago was Wednesday and Thursday, as it was the year before that. </p></div><div><h2>This Year it is Friday and Monday</h2></div><div><p>What is it about Tuesday and Wednesday? The answer, as it is every year (on days such as the above), is hundreds of billions of yen of flows from people who are obliged to allocate money on these particular days.</p></div><div><p>For most, the benchmark is this upcoming Friday.</p></div><div><p></p></div>

Last year was Tuesday and Wednesday. The two years before were too. The year before that was Monday and Tuesday. Five years ago was Wednesday and Thursday, as it was the year before that. This Year it is Friday and MondayWhat is it about Tuesday and Wednesday? The answer, as it is every year (on days such as the above), is hundreds of billions of yen of flows from people who are obliged to allocate money on these particular days.For most, the benchmark is this upcoming Friday.

JAPAN DELTA III - The Annual TOPIX Dividend Trade

Japan

KEYENCE CORPORATION develops, manufactures, and sells sensors and measuring instruments used for factory automation (FA) and high technology hobby products. The Company's products include fiber optic sensors, photoelectric sensors, programmable logic controllers (PLC), laser scan micrometers, bar code readers, and radio-controlled model cars.

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Keyence Corp (6861 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

🇯🇵 JAPAN MARKET (& COVID-19) UPDATE 19th April - Overshoot

MARKING TIME - Japanse equities were becalmed last week, rising by 0.84%, while the Yen traded at 107 all week. The Bank of Japan bought ETFs on...

Campbell Gunn

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 DELTA IV - Is The GPIF In Buying?

The GPIF is the world's largest pension fund at what was $1.6 trillion-plus at the end of December 2019. The management of the GPIF has made...

Travis Lundy

JAPAN DELTA III - The Annual TOPIX Dividend Trade

Last year was Tuesday and Wednesday. The two years before were too. The year before that was Monday and Tuesday. Five years ago was Wednesday and...

Travis Lundy

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