Bloomberg, in contrast with The Economist (or just Banyan?), is all about making you feel better, and they pretty much completed the trifecta of positive outlooks on Japan. Contrast the outlook from the auto industry growth in Tohoku with the rebuilding discussion out of TE and check for bullishness. Supply chain management is now coming into the next level in corporate Japan and a higher degree of supply chain integration, consolidation and optimization which could lead Japanese overall management renaissance. One can only hope.
Chirping in positively as well is the discussion on the legs of the rally which is particularly accentuated in the Nikkei, courtesy of Goldman Sachs Asset Management’s Kathy Matsui (video). If there is the continued 5-10 % increase in the index value, continued fall in the currency and recycling of export cash into overseas expansion, I do expect this to potentially feed on itself for a while and hopefully make the fiscal adjustments sorely needed in Japan to become somewhat easier to push through. The unmentioned x-factor is of course the extent of the Tohoku state-led recovery. With any luck, hopefully we can escape the 10% of GDP savings rate identified by Richard Koo of Nomura Research Institute which seems to support the picture of savings recycling positive feedback loops I’ve mentioned earlier.
Of course, as is the process of any change, the restructuring of both Corporate Japan in the sense of supply chain management and energy savings coupled with the reconstruction is naturally something that will drag down the cash allocation for a while to come – assuming of course it has not been front loaded in terms of FY 2011 losses. Thus, P/E numbers and P/B numbers could be subdued in YoY terms, and the more interesting features will be yen based P/S numbers to see if corporate cash is being recycled into growth and priced to market for future growth prospects. Particularly interesting: profit margin collapse on the back of sales growth. lative performances of revenue to sales will be closely watched on my analysis desk.