Anyone paying attention to the Yen? It’s had the biggest run vs. the dollar in 13 years over the past 4 months. With a 26% run since August and 34% boost vs. last year, any company with exposure is likely to get a shot in the arm as it relates to top line translation. Keep in mind that this is NOT because the local economy is in overdrive. In fact, last week he final cabinet Office tally for Q3 GDP came in at a decline of -1.8% as the full impact of the global slowdown reverberated through Japan’s export industries.
If you read our Macro team’s 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.
Nonetheless, the market is not likely to care about the Macro angle when these luxury goods companies report the upcoming quarter and see favorable translation – presuming that they don’t lose control of any Yen-denominated inventory). Here’s who benefits the most (% of sales in Japan).
If you read our Macro team’s 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.
Nonetheless, the market is not likely to care about the Macro angle when these luxury goods companies report the upcoming quarter and see favorable translation – presuming that they don’t lose control of any Yen-denominated inventory). Here’s who benefits the most (% of sales in Japan).
