Japan

The Bank of Japan is growing more open to the idea of cutting short-term interest rates deeper into negative territory, responding to global risks that are forcing other central banks to cut rates, said people familiar with the bank’s thinking, The Wall Street Journal reported. If the bank were to do so, however, it would look for ways to avoid sharp declines at the longer end of the yield curve, the people said.

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Japan’s Topix index slumped, wiping out this year’s advance, after the yen climbed to its highest since March last year on global trade concerns and political uncertainty, Bloomberg News reported. The benchmark measure fell 1.2% Tuesday, resuming trade after a three-day weekend. It is down 0.5% year-to-date and one of the worst performers among the 24 developed markets tracked by Bloomberg. The yen maintained gains after rising 1.1% against the dollar over the past four sessions and is trading around 105.28 to the dollar.

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Japanese Banks Are Circling the Drain

Banking in a country where almost nobody defaults sounds easy. For Japan’s lenders, it is anything but. After almost three decades of near-zero, zero, and now negative interest-rate policies, Tokyo has pushed its banking system to its limit, The Wall Street Journal reported. The country’s smaller lenders in particular are facing an existential threat to their business models. Located in aging and shrinking prefectures, they lack the ability to increase fee-related incomes that major banks can raise. Japan has too many banks, and consolidating them into larger players will buy time.

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Nissan Motor Co.’s prospects are getting bleaker by the quarter, with the Japanese automaker forced to shed 12,500 jobs and reduce production capacity by 10% as its aging lineup weighs on profitability amid a global slump in car demand, Bloomberg News reported. In the 250 days since the arrest of former Chairman Carlos Ghosn for alleged financial crimes, focus has shifted to the deteriorating business and the ability of Ghosn-protege-turned-accuser Hiroto Saikawa to revive the Yokohama-based company.

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Japan’s Akebono Brake Industry Co Ltd said on Thursday it will receive about $185 million from a corporate turnaround fund to help restructure its money-losing business, sending its shares sharply higher, Reuters reported. The supplier of brakes to General Motors Co, which makes up about a quarter of Akebono’s sales, and other automakers said it would issue new shares worth 20 billion yen ($185 million) to Japan Industrial Solutions. Shares of Akebono soared as much as 43% to 166 yen on the Tokyo Stock Exchange, before closing up 8%.

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Canadian aerospace company Bombardier has announced the sale of its regional jet program to Japan's Mitsubishi Heavy Industries Ltd. for $550 million, the International New York Times reported on an Associated Press story. The company is seeking to exit the commercial plane market and focus on business jets and its large rail segment. Bombardier chief executive Alain Bellemare said Tuesday the sale signifies the completion of the transformation of its aerospace business.

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Japan’s financial regulator is warming to a junk bond market. Debate has been heating up in the country about junk bonds after the first such publicly offered note in the nation priced last month by Aiful Corp., a consumer lender that teetered on the verge of bankruptcy a decade ago, Bloomberg News reported. With negative rates persisting into a fourth year and showing no sign of abating, investors are increasingly under pressure to take on more risk to secure returns.

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The eurozone’s anemic growth and inflation mean it’s probably already experiencing its own “Japanification,” and escape could prove hard if the Asian nation’s track record is any guide, according to ING Group, The Japan Times reported. Europe’s situation has long left it open to comparisons with Japan in the 1990s. In a report Monday, ING lists similarities including an increase in government debt, a buildup of bad loans at banks, an aging population and huge monetary policy loosening.

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The slump in Japanese exports accelerated during May on the back of an escalation in global trade tensions and the effects of a lengthy holiday to mark the ascension of a new emperor, the Financial Times reported. Data published by Japan’s Finance Ministry on Wednesday showed that exports from the world’s third-biggest economy fell by 7.8 per cent during the month compared to a year ago, marking the sixth month of contraction in a row.

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A consumer loan company priced Japan’s first publicly-offered junk bond on Friday with an interest rate of just 0.99 per cent, a coupon that highlights the country’s institutional desperation for yield and the increasingly eye-catching distortions caused by the Bank of Japan’s negative interest rate policy, the Financial Times reported.

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