Dollar Denominated Exports Drop Under 50% of Total

In 2003, dollar denominated exports to total exports fell to 48%, the first time under 50% since the MOF began looking at these ratios. Over the past three years, the ratio has fallen by 4 percentage points. Yen denominated exports were 39%, while Euro-denominated exports were 9%, both rising by some 3% points over the last three years. Exports to Asia last year rose to nearly 50% of total, while exports to the US fell for the first time in two years because of growing local production.


TT's Take A lower dollar currency exposure in exports ostensibly reduces the sensitivity of the Japanese eonomy to a stronger yen, but Japan's balance of payments is already significantly resistant to a strong yen because some 50% of the BOP surplus is in the form of income from overseas investments. In historical bouts of trade friction, US pressure to push up the yen has not had that noticeable impact on the BOP, as long as export volumes are favorable.

JP Morgan Global Strategy Turns Bullish on Japan

JP Morgan's global strategist has turned very bullish on Japan, recommending a 5% point overweight to 14% of global portfolios. The bullish outlook for global trade is helping, while restructuring in Japanese companies is not yet fully discounted. The overweight in Japan follows a 62% allocation to the US. An increase in global capital expenditures will ostensibly help Japan's market because of the high weight of capex related companies. Conversely, because of lower weights of the manufacturing sector in Euro markets and still insufficient restructuring.


TT's Take Spreading bird flu and continued upward pressure on the yen have kept the Nikkei 225 below the 11,000 milestone. Ostensibly, clearer signs that the yen's upside has been capped would be bullish for stock prices, but the Euro countries have no more stomach for a strong Euro, and it is the Asia economies that have all of the balance of payments surpluses, so their currencies by rights should rise, and if they do, the Euro could fall back somewhat. However, a stronger dollar would actually be disruptive for the US market, as investors would take that to mean that Asian central governments would not need to purchases as many US treasuries to support their currencies. Ironically, a stronger dollar, ostensibly what everyone supposedly wants, would be disruptive not only for the US equity market, but other equity markets as well.

Major Japan Shipbuilder Orders Triple In '03

Japan's six major shipbuilders, including Mitsubishi Heavy (7011), saw orders surge threefold in 2003 to a 30-year high on the back of rapidly expanding oceangoing shipping operations, especially those involving China. Total orders for the shipbuilders, excluding those for naval vessels, reached 13.42 million gross tons in the year, the highest level since 1973 when the shipbuilding industry was hit hard in the wake of an oil crisis. The July 2003 imposition of tougher safety regulations for bulk carriers transporting mineral ore and grain also contributed to the strong orders. Shipbuilders expect to see orders received this year and beyond taper off a bit but remain relatively strong.


Mitsubishi Heavy benefited most from the strong business, with its orders jumping 5.3 times on the year from 550,000 tons to 2.9 million tons, mainly due to orders for 14 container ships from the Evergreen shipping group of Taiwan and others. Orders for vessels transporting liquefied petroleum gas (LPG) also increased. In terms of tonnage, Universal Shipbuilding Corp. -- which was created in October 2002 through the merger between the shipbuilding divisions of NKK Corp. and Hitachi Zosen Corp. (7004) -- topped Mitsubishi Heavy, with orders reaching 4.25 million tons, up 150%.


Business was brisk mainly because of increased orders for vessels used to carry oil, coal, iron ore and grain to and from China, according to industry sources. Strong shipping activity between North America and Southeast Asia was another factor, as were shipping companies' orders for vessels carrying natural gas from the Middle East, where projects to develop gas fields are increasing.


Mitsubishi Heavy's stock price briefly outperformed the Topix between June and September of last year, then gave up the majority of those gains before confirming downside resistance in November. It since has been performing largely in line with the overall market. Chart