Financial Times, Koizumi s bond dilemma
投稿者： amethys5 投稿日時： 2001/08/04 19:54 投稿番号： [13394 / 203793]
MKoizumi's bond dilemma
By John Thornhill
Published: July 29 2001 19:27GMT | Last Updated: July 30 2001 06:52GMTr
Koizumi does not think the government can continue to spend its way out of recession.
He has promised to restrict new debt issuance to Y30,000bn next fiscal year, which should help support JGB prices short term.
Some fund managers believe that if Mr Koizumi implements structural reform Japan may experience another bout of economic contraction and deflation, enhancing the short-term attractions of JGBs. "Japan is the weakest of the major economies. It has substantial deflation and ongoing problems and high real rates. From a bond perspective that is all positive," says Keith Kelsall, senior portfolio manager at Daiwa SB Investments.
Yet in the longer term, Mr Koizumi may spell trouble for JGB investors whether he succeeds or fails. If he proves less radical than he promises, worries about over-supply will resurface. Some bond analysts doubt whether Mr Koizumi can stick to his pledge to limit bond issuance if the economy begins to slide again.
"At G7 meetings, he [Koizumi] has committed himself to maintaining at least zero growth. But at the same time he is saying that he will cap the debt issuance at Y30,000bn in the next fiscal year," says Masaaki Mizuno, bond strategist at the Tokyo office of Dresdner Kleinwort Wasserstein. "Not everyone in the market believes that he can achieve both these conflicting targets."
But Mr Koizumi will also ruffle the JGB market if his restructuring plans work and he stimulates new demand. Low yields in the JGB market have been sustainable because the corporate sector has been deleveraging. But if the economy revives and demand for money increases, the government's refinancing costs will mount and perhaps dampen the incipient recovery.
Mr Mizuno says any such turnround would happen slowly. The growing economy should increase government revenues and allow it to reduce its fiscal deficit. "If yields go up on the back of a healthy economy then you can expect higher tax income that will relieve the fiscal deficit".
Foreign investors in the JGB market may wonder why they should take the chance. "Yen bonds cannot be said to be either high return or low risk," says Andrew Smithers, chairman of Smithers & Co. "Apart from benchmarking reasons, I can find no alternative arguments for holding a Japanese bond."
By John Thornhill
Published: July 29 2001 19:27GMT | Last Updated: July 30 2001 06:52GMTr
Koizumi does not think the government can continue to spend its way out of recession.
He has promised to restrict new debt issuance to Y30,000bn next fiscal year, which should help support JGB prices short term.
Some fund managers believe that if Mr Koizumi implements structural reform Japan may experience another bout of economic contraction and deflation, enhancing the short-term attractions of JGBs. "Japan is the weakest of the major economies. It has substantial deflation and ongoing problems and high real rates. From a bond perspective that is all positive," says Keith Kelsall, senior portfolio manager at Daiwa SB Investments.
Yet in the longer term, Mr Koizumi may spell trouble for JGB investors whether he succeeds or fails. If he proves less radical than he promises, worries about over-supply will resurface. Some bond analysts doubt whether Mr Koizumi can stick to his pledge to limit bond issuance if the economy begins to slide again.
"At G7 meetings, he [Koizumi] has committed himself to maintaining at least zero growth. But at the same time he is saying that he will cap the debt issuance at Y30,000bn in the next fiscal year," says Masaaki Mizuno, bond strategist at the Tokyo office of Dresdner Kleinwort Wasserstein. "Not everyone in the market believes that he can achieve both these conflicting targets."
But Mr Koizumi will also ruffle the JGB market if his restructuring plans work and he stimulates new demand. Low yields in the JGB market have been sustainable because the corporate sector has been deleveraging. But if the economy revives and demand for money increases, the government's refinancing costs will mount and perhaps dampen the incipient recovery.
Mr Mizuno says any such turnround would happen slowly. The growing economy should increase government revenues and allow it to reduce its fiscal deficit. "If yields go up on the back of a healthy economy then you can expect higher tax income that will relieve the fiscal deficit".
Foreign investors in the JGB market may wonder why they should take the chance. "Yen bonds cannot be said to be either high return or low risk," says Andrew Smithers, chairman of Smithers & Co. "Apart from benchmarking reasons, I can find no alternative arguments for holding a Japanese bond."
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