Sun rises over the Nikkei
JAPAN’S Shinzo Abe has managed to achieve an electoral success unmatched by the leaders of other advanced economies.
Reforms associated with Abenomics may not have been adopted as quickly as once promised, but the prime minister has delivered growth after years of stagnation with the IMF forecasting 1.5pc expansion this year.
Abe benefits politically from the fact that Japan is a less unequal society – prosperity is more evenly spread – than its Western partners. The revival of output, driven by smaller enterprises as well as sectors such as motors, IT and industrial machinery, powered the key Nikkei stock market index to 15 consecutive days of gains, and its best level since 1996.
Abe and the Bank of Japan have kept the monetary accelerator to the floor. A squeeze on consumption is baked in the cake with the commitment to raise sales taxes in October 2019. Some 40pc of the proceeds are due to pay for child care. This is seen as essential in encouraging women back to work.
As one of the world’s great exporters Japan is also being supported by a weak yen. The rise of China has tended to obscure Japan’s role as a global economic power. But even though it may not enjoy the best of political relations with Beijing, it is a big supplier of the industrial equipment which propels the People’s Republic forward.
Abe’s LDP stood firm against the challenger ‘Party of Hope’ headed by Tokyo governor Yuriko Koike. That may give him the opportunity to press ahead with corporate governance reforms. There are signs deflation has been beaten back but prices are still rising at below 2pc and wages are subdued.
In Japan, at least the great monetary easing still has a distance to run.
Grandees’ charter
READERS dipping into the FT City Network survey on capitalism might be forgiven a wry smile. Included among City panjandrums bewailing greed in the boardroom, short-termism and tax avoidance are some serial offenders.
Sir Nigel Rudd, chairman of engineer Meggitt, suggests boards have been hijacked by the management class. As chairman of a variety of public companies including Boots, Pilkington, BAA and Invensys, all sold to overseas buyers, Rudd subjugated the public interest to short-term gains for investors and enriched management.
A neat aspect of takeovers, wherever they come from, is that more often than not they trigger payouts on share options turning managers into multi-millionaires.
Douglas Flint, who has just stepped down as chairman of HSBC, spent much of his time in office clearing up the mess made by some of his predecessors with disastrous takeovers of money laundering banks in Mexico, subprime mortgage lender Household and the Safra private banks.
It was on his watch that disclosures of tax avoidance at the Geneva branch of HSBC emerged, including arrangements under which chief executive Stuart Gulliver was paid through Panama to the avoid avaricious eyes of colleagues.
There is joy in the heavens when the sinner is repentant but it is worth noting that many of those named in the survey stuffed their wallets with excessive pay and awards before launching their attack on the next generation. Moreover, particularly in banking, they have done little to curb the pay arms race which is a contributor to the great divide between ordinary citizens and the elites.
It is during their period in office that the forces which produced Trump, AfD in Germany, the Freedom Party in Austria and Brexit were forged.
On a day when corporate bigwigs are being disparaging of short-termism we learn that shareholders in UK-listed firms are in line for record breaking dividends of £94bn this year. This at a moment when business investment is underwhelming and productivity in the soup.
The longer term solution is to invest in technology and equipment, not executive pay and special dividends.
Poor signal
HANG out the bunting, the London Stock Exchange is set to welcome broadcast and telecoms-mast pioneer Arqiva to the listings after private equity owners failed to find a buyer for the £6bn outfit.
Beware of private equity bearing gifts. The 2016- 17 accounts show an enterprise weighed down with £5.2bn of debt which paid no UK corporation tax over the last two years. That’s a message which should keep the masts vibrating.