Tag: Eurozone

Japan Euro Economic Recovery

Policy-makers in Japan have substantially enhanced the Tokyo Stock market, fueling the economic recovery.  The question now being asked is, could this pattern be experienced in Europe in the near future?

Japan’s Central Bank is now printing a ton of new money which has devalued the yen and “turned the tide in the war against falling prices.” The problem with this is though that in practice what it will do is push people to put off spending and opt instead to save.  That will not be good for the economy.

Irrespective of this, Europe is being encouraged to follow Japan’s lead.  It has been argued that the only thing that will save the Eurozone now is additional printed Euros.  That will guard against deflation and revive the problematic-countries’ economies.

The question on the Japan Euro potential connection now is to review the Japan situation and then to apply it to Europe.  The primary goal should be “ending deflation” according to JP Morgan Asset Management analysts.

Japan’s Yen Versus the Euro

For nearly a decade now, Japan’s Finance Minister, Jan Azumi has been warning that the yen’s escalation against the euro have happened rather too quickly.  Europe has been battling to solve its debt crisis which has resulted in a 15 percent appreciation of the yen against the Euro during the last six months of 2011.  This has continued into 2012 which has witnessed a further 2.4 percent yen increase.

Impact on Japan’s Economy

Unfortunately, it’s not just Europe that is suffering from the debt crisis.  According to UBS foreign-currency strategist, Daisaku Ueno, it is negatively impacting Japan’s economy.  He pointed out, “in

dollar/yen, companies are adjusting to yen strength. But as Japan exports more to the Eurozone than it imports from it, it is more difficult to adjust to euro weakness.”

However, this has not been affecting overseas investors.  They are still purchasing Japan’s bonds which is thus elevating the appreciating pressure on the yen.  As well, the currency was 2 percent stronger at the end of last week than the figure for October 31 – the most recent dollar/yen intervention.

Asia’s High End Art Market

Hong Kong has been instrumental in boosting Asia’s art market over the last few years, especially with its 300 percent increase between 2009-10.  This is thanks to the wealthy Chinese who have been enthusiastically purchasing art, resulting in Hong Kong becoming a global art sales center.  It seems like art and other alternative investment options – such as wine – have in general been on the rise irrespective of global financial misfortunes such as the collapse of Lehman Brothers three years ago.

Asia’s Rich Getting Richer

It seems that the wealthy individuals in the Asia region are just increasing their financial worth.   For example, the region is even beating Europe, standing at $10.7tr., whereas Europe is only up to $10.2tr.  Art investment definitely has a lot going for it, being a little different, enjoyable and having pretty good returns. As well what is also good news for Asia is that vis-à-vis the art market, it has not been impacted by the Euro Zone debt crisis.  Indeed, the Mei Moses Global Art Index found almost a 12 percent increase in 2011 to November.

One art consultant, Bobby Mohseni, noted, “it may not be a good time for sellers but it's an excellent time for buyers. During late 2008 and 2009, I highly advised clients to buy. With Chinese contemporary art, some prices have gone exceptionally high and that's just over a decade … so it's best to look at upcoming or mid-tier artists.”

In addition, confidence in China’s contemporary art market remains quite high, even though the same confidence is lacking in the European and American counter markets.  In other words, Asia does not have to feel the negative impact of what is going on in the western world – as has been seen through its art market.

Asia Playing Big Brother on Euro-Finance Meetings

Europe:  Asia Is Watching You

Over the last week there have been a variety of important meetings in Europe over which Asia has been keeping its proverbial Big Brother eye on.  Indeed, it may even be somewhat more than just overseeing the progress of the meetings.  According to UBS Asia Pacific’s chief investment strategist, Yonghao Pu, “at the moment, we [Asia] are kind of a hostage to what’s going on in Europe.”  Due to activities in the global economy, China’s hand is being forced in a way it’s not especially fond of.

Beijing’s Banking

Beijing has had to make some changes.  It already removed some of its demands for rural banks and is now doing the same with its major banks, in an effort to facilitate banks giving out loans while offsetting the global economy’s ripple effects.   

Beijing has also been quite firm in its insistence that it will not be fishing the Eurozone out of its hole either.  As well, due to less demand, there is decreased manufacturing  in China.  Since Europe is the biggest export market of China, if the region goes into trouble economically, this will negatively impact all Asian exports. Indeed, according to China’s vice minister for foreign affairs, Fu Ying, “the argument that China should rescue Europe does not stand, as reserves are not managed that way.” 

The good news for Asia is however,  that the region is doing better financially than Europe. Still, it needs to be aware of the fact that when the Eurozone cracks, it could encounter problems too.  Keep watching out for Euro meetings to get an idea of what Asia’s next financial step should be.