The last few days of data have been largely very good for Japan. Yesterday we got retail sales being very positive, and today it’s total economic output at 2.7% rather than 2.2% as expected. Retail was probably the better thing, after all people buying their way to economic growth is a good thing in Japan (I don’t have the same heartthrob for consumption globally as all American pundits, but in China and Japan I believe there exists large benefits and potential for increasing the value of spending to get velocity of money going). Now if Bloomberg could just stop yapping about the sales tax hike in April and the ‘horrid, horrid’ effects that had on the economy when the effects were less than expected and a pretty natural cause of a pre-hike consumption spree things would be good. (And one of your editors was even out on bad math yesterday evening, geez…)
Then, is it time to buy?
The Nikkei 225 certainly seems in on the idea after ticking in at 15 550 since the data came out, a 1.45% jump to yesterday’s closing and half that to the US-traded futures, with only a 0.18-0.2% move in the yen to match. Looking at the futures values, which I prefer since they seem to cover days better and the economy is open enough, pushing above the 15 400 level put us “better than halfway” from peak to trough by Fibonacci standards, and any move after 15 650 will probably mean that we get some medium term updraft as the resistances are stacked very thin from here on out:
Adding to this is the fact that the 63 SMA is sitting pretty at 15 512, meaning we just had a cross and that the 21 SMA was rejected yesterday. Things are indeed looking up across all accounts! Nikkei 225 at 16 400 in November I’m guessing!
Fundamentally, Japan needs the good data, and Abe is getting lapped by Xi in opening up free trade zones and doing economic reforms. Both of them are forceful leaders appointed in late 2012 that have a better position than anyone in a long time to actually accelerate reform in their respective countries, so there should be a lot of transferable qualities in policy outlooks even though the political and economic reality couldn’t be more different. Abe, stick to the policy Noda forced on you and drive Japanese reform, pretty please? Sure, you’re better off than western media makes you out to be, but I really think Japan needs a corporate-vs-consumption tax realignment to lower some of the world’s highest corporate taxes, and with your debt position that won’t really happen unless you at least get consumers to take part of the hit. Lower that and get the companies spending, given your unemployment salaries will go up anyway, and people will probably consume nonetheless!