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The final cabinet Office tally for Q3 GDP came in at a decline of -1.8% more than 4 times the initial estimate of -0.4% released last month as the full impact of the global slowdown reverberates through Japan’s export industries –illustrated by the 16,000 employee headcount reduction announced by Sony (50% comprised of hapless haken) this morning.

If you read our work regularly you know that we think Japan bulls looking for a glass-half-full scenario in which US and EU government stimulus packages shore up demand are going to be sorely tested as they wait for income derived from public works projects to be converted into flat screen TV purchases. Furthermore, we don’t see domestic demand helping to close the gap in Japan: BOJ has only 30 BP of wiggle room left and, if consumers there were content to build of $15 trillion in the zero rate environment that ended less than 3 years ago presumably they won’t be rushing out to spend now.

We closed on EWJ short out last Friday, but we will be looking for opportunities to go short again in the near term if we can sell into strength.

Andrew Barber