Bank of Japan to invests in Japanese listed companies

Bank of Japan to invests in Japanese listed companies

This year the Bank of Japan has decided to invest directly into Japanese listed companies.

They are in the top 10 shareholdings for the majority of listed stocks on the Nikkei index. This is supposedly going to help the economy because they will provide a floor in prices.

Unfortunately for the BoJ, this act will attract a lot of criticism in the future and it does seem like an act of desperation.

The money used to buy shares has to come from taxpayers, except that Japan has the largest government debt to GDP in the known world.

There is now talk that China needs to provide more stimulus to the economy as it is inexorably slowing to a point of contraction.

There is a belief that the Chinese government will provide similar packages as their Japanese counterparts.

The level of debt in the world is enormous, with over $14 trillion of government bonds on a negative yield.

Australian Economic Performance

Australian Economic Performance

Yesterday one of the Big 4 banks, I’ll let you guess which one, released a report into the economic performance of each State in Australia.

Predictably the report highlighted the fact that the mining boom has finished. They also argued that the States that were not part of the mining boom have taken the lead and are “powering ahead”.

By powering ahead, there has been a slight increase in housing activity in NSW and Victoria.

The report also argues that personal spending is rising, however they probably didn’t look at the spending increase being based on people maxing out their credit cards even further.

Credit Rating

Credit Rating

There has been a lot written about the decision by the ratings agencies to lower the credit rating outlook of Australian Government debt. This is actually significant for the market although the negative outlook means that the actual rating may not change for another 18 months.

Apparently the ability of the government to continue fiscal reform and to get the budget through the Senate is all that is required to maintain the Triple A rating. A quick look at the composition of the Senate tells me that the outlook may be reduced faster than thought.

A little reported event that occurred at the same time the government got their rating cut was that the Big 4 banks also had their outlook reduced to negative as well. It makes sense that this would happen as the market believes that the banks are given an automatic lifeline if the credit markets seize up.

Why China is the Big Worry

Why China is the Big Worry

Most people think that China is a great success story in being able to transition from Communism to Capitalism in a little over 1 generation, unfortunately that is not the case.

This article from Bloomberg takes a light-hearted look at the current woes facing the Chinese economy.

A quick look at the chart below shows the perilous state of Chinese debt levels