Faith In Abenomics Falters: Foreign Investor Flows Collapse 94% In 2014

It appears, despite all the promises, all the lies, and all the constant propaganda, that foreign investors have finally seen right through Shinzo Abe's risible plan to revive the Japanese economy by crashing its currency (just like Russia?). As Bloomberg reports, after pumping record amounts of cash into Japanese shares last year, they’ve hardly added to holdings in 2014. Inflows are down 94 percent this year to 898 billion yen ($7.5 billion), on pace for the smallest annual amount since the 2008 global financial crisis.

 

 

While polls suggest simultaneously a surge in Abe approval and a plunge (depending on which survey you follow), it appears the market has provided the clearest look at how global investors have become disillusioned with Abenomics... so all that is left if BoJ/GPIF buying Japanese bonds/stocks to keep the facade alive.

 

As Bloomberg reports,

Purchases of the nation’s shares through Dec. 19 by investors outside Japan were less than a tenth of the 15.1 trillion yen they bought last year, according to data from the Tokyo Stock Exchange. Trust banks, which typically trade on behalf of pension funds, added 2.7 trillion yen, after offloading about 4 trillion yen of equities in 2013. Individuals were net sellers for a fourth straight year.

 

Fund managers from Sumitomo Mitsui Trust Bank Ltd. to MV Financial say to lure investors back, Abe needs to move beyond short-term stimulus and start enacting the structural changes he laid out in his initial plan, dubbed Abenomics, to end Japan’s two-decade economic malaise.

 

“We need to see a framework where growth isn’t dependent on monetary easing,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust, which oversees $325 billion in assets. “If not growth, then at least a way to increase productivity. For now there’s nothing like that, so I imagine it’ll be hard for stocks to keep going higher and for foreigners to take an interest in them.”

 

They have lost their place as global leaders. The potential exists in Japan for recapturing some of that, but it requires profound changes and changes are just not something that Japanese are good at.”

 

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Abe has courted international investors, exhorting Wall Street in a September 2013 speech to “buy my Abenomics.” A year later, the higher consumption levy had pushed the nation back into recession. Non-domestic investors were net sellers of equities this year until the central bank’s surprise easing on Oct. 31. While the Topix has climbed 9.4 percent in 2014, a weakening yen means that in dollar terms, the share gauge is poised for a 4.4 percent loss.

 

 

Foreigners are “momentum jockeys” who tend to follow the trend...

 

“If an eye-opening growth strategy was proposed, foreigners might come back and start buying again,” Sumitomo Mitsui Trust’s Sera said. “But if we haven’t seen one by now, there’s almost no chance we ever will.”

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