Random Conspiracy Theory – Gangpaeh vs Yakuza !

Move over BoJ, we have BoK tomorrow.

What impressed me this week was Christine Lagarde coming out to praise Japan’s bond buying when during the G20 meeting in Feb this year, we had the Finance Ministers of the largest countries in the world vowing to avert a currency war.

Well, we have it at our doorsteps under a different name – STIMULUS !


South Korea probably is the largest direct competitor to Japan. Name it, the cars, the electronics, the chips, the machinery and more. Their population, at 49 mio vs Japan’s 127 mio and their GDP at 1.1 trillion vs Japan’s 5.8 trillion. Yet they have none of Japan’s problems.

Theirs is still a moderate growth story after all these years.

Bank of Korea will have their say tomorrow and it is going to be a whimper.

“In response to these downside risks to growth, a supplementary budget will be formulated in April. We expect the extra budget to be KRW14trn, or 1% of GDP, which we estimate would add 0.4 percentage points (pp) to GDP growth in 2013 (see South Korea: Expect a sizable supplementary budget, 27 March 2013). The government will announce measures to stimulate the property market as well, including a reduction in public housing supply, deregulations, tax cuts and financial support, which we estimate will add another 0.1pp to GDP growth in 2013.” taken from Nomura’s Asia Insights.

They are under pressure from rising populism in politics to retaliate against all the central banking moves we have witnessed.

Now the government intends to unveil a stimulus package next week, which is likely to be disappointing compared to the quadrillion yen that Japan will be spending.

The KRW has fallen to a 6 month low against the USD, a 5% depreciation for this year (I use 28 Dec 12 as year end) compared to the JPY’s 15%. The Kospi is down 3% compared to the Nikkei’s meteoric 28% rise.

I am going off tangent here but Korea has one thing on their side. They seem to be making products people want whereas Japan, for their falling yen is still seeing falling exports and the mighty Sony can slash prices overseas on a cheap currency but no one is going to buy an extra TV for that reason. [but Japanese solar panels appear to be better quality than China’s]

[Japan Feb Exports -2.9% On Year, Expected +0.9% On Year; Imports +11.9% On Year] – for all that extra oil they are importing because Fukushima is still leaking.

It will still take the Nikkei another 2.5 years or so, at current run rate of 28% per quarter to achieve its former glory. That makes all the Japanese companies prime takeover targets, even if they make products people do not really want. Because buying them out would just exterminate the competition.

The Kospi is still fairly overvalued, trading at P/E of 48 compared to Nikkei’s 26 (DJIA is 14 and STI is 13).

Merging the Gangpaeh (korean mafia) with the Yakuza just needs a little policy tweaking to strengthen the KRW a little. And against a weakening JPY, the chaebols will rule. Samsung can easily do that, with its market cap of 224 trillion KRW, they are larger than every company on the Nikkei except for Toyota. And one by one they shall becometh the prey.

This is the best window of opportunity because China cannot be seen buying up Japan right now and this is the best thing about having a blog – you can say almost anything without fear of repercussions.