Pimco sees Japan wooing capital as tariffs spur diversification
The Asian nation is drawing inflows that seek to benefit from "once-in-a-generation structural reforms' in equities and rising rates in fixed income after decades of monetary stimulus, according to Ben Ferguson, co-head of Pimco in Japan. U.S. President Donald Trump's policy announcements have been "disruptive' and the latest tariff announcements "highlight the need to, at least consider diversification,' he added.
"Japan historically has not been a focus as an investment opportunity for global investors, but this is one of the most dynamic moments that we've seen in this economy for the better part of the last three decades,' Ferguson, a former Goldman Sachs Group banker who joined Pimco in 2023, said in an interview. "Japan has moved toward the top of mind for global allocators.'
A worldwide backlash against Trump's trade war is accelerating the hunt for alternatives to U.S. assets, and Japan — with its multi-trillion dollar bond and equity markets — has become a favored bet. Global funds have continued to scoop up Japanese assets after buying a record ¥9.16 trillion ($62.6 billion) of stocks and bonds in April, according to government data.
There are, of course, risks to the outlook. The U.S. has slapped a 25% tariff on Japan's shipments that'll come into effect Aug. 1, with the nation also subject to a levy on cars and auto parts, as well as a tariff on steel and aluminum. As the deadline approaches, both Tokyo and Washington are facing growing pressure to strike a deal.
"There's a rationale there, which is Japan geopolitically is one of the most — if not the most — important relationship to the United States,' said Ferguson, citing the U.S.' significant military presence in the country. "Both sides have an incentive to make sure that this specific trade issue does reach a resolution.'
Pimco, which oversees more than $2 trillion, expects investors to plow more money into the world's third-biggest bond market as it's an "attractive investment diversification from a large Treasury allocation — especially when swapped into the dollar,' according to Ferguson.
A degree of calm has returned to Japan's bond market after authorities trimmed sales of longer-dated debt to allay jitters sparked by the reduction of the central bank's purchases. A sale of 20-year government bonds proceeded smoothly on Thursday, with the bid-to-cover ratio for the offering rising to the highest level since March.
"What we saw over the last few months may be the high end of the range of volatility in the market,' Ferguson said. "We think the relative value, particularly at the long end, is attractive.'
At the asset management industry level, Ferguson is keen to tap into opportunities to help invest the more than $7 trillion of domestic savings accumulated by Japanese households, which is among the biggest pool of such capital in the world.
If this stockpile of cash isn't recycled back into the economy, it may hamper corporations' ability to make fresh investments, weigh on productivity and hurt Japan's ambitions for sustainable price growth.
"If you think about national resources on a global scale, Saudi Arabia has oil, Japan has savings,' Ferguson said. "You can be savings-rich, but if everyone else is outgrowing you and those savings aren't deployed to drive economic activity and growth, you actually end up becoming poorer. It's a headwind for the economy.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
NHK
2 hours ago
- NHK
At least 19 subcontractors say they are unpaid for Expo pavilion construction
NHK has learned that at least 19 subcontractors that participated in building foreign pavilions at the 2025 World Expo in Osaka are saying they have not been paid for their work. The subcontractors claim the companies that commissioned the work failed to meet the deadline to pay them. NHK found the subcontractors engaged in constructing pavilions for seven countries -- the United States, Angola, Serbia, China, Germany, Malta, and Romania. In some cases, first-tier subcontractors claimed the primary contractors did not pay them. In other cases, the first-tier subcontractors were also unable to pay their second-tier subcontractors, causing a "chain of non-payment." The alleged non-payments range from about 1 million yen to 120 million yen, or about 6,800 dollars to 820,000 dollars, per firm. Some subcontractors said that caused severe problems for their management. Subcontractors say prime contractors cited alleged "breach of contract" and "client dissatisfaction" as reasons for non-payment. The subcontractors also say they were repeatedly told that officials in charge were not in Japan. Multiple companies that commissioned the work told NHK that the allegations are false and there are no outstanding payments. The expo's association, the central government and the Osaka prefectural government are considering launching an investigation into the situation and how to respond. Kusunoki Shigeki, a professor at the University of Tsukuba, said construction works may have been carried out without finalizing contract details amid tight time constraints, due to the effects of rising labor costs. He also said that when the client or prime contractor was an overseas company, gaps in understanding contracts may have occurred, as well as communication difficulties, which could have led to problems. One hundred and fifty-eight countries and regions are taking part in the ongoing expo in western Japan.
Japan Times
2 hours ago
- Japan Times
Ishiba rules out joint document on U.S. tariffs as deal's details trickle out
There is no plan to issue a joint document on the tariff agreement reached between Japan and the United States earlier this week, Prime Minister Shigeru Ishiba has said, even as numerous details about the deal remain unclear. Ishiba made the remark Friday at a meeting among leaders of ruling and opposition parties that was held following the agreement, which included a 15% U.S. "reciprocal tariff" on imports from Japan, cut from the 25% rate announced earlier. Opposition parties criticized the Japanese government for failing to issue a joint statement on the agreement. They also urged the government to compile a supplementary budget plan, citing the need for economic measures to cushion the tariff impact. The meeting was attended by Tetsuo Saito, leader of Komeito, the coalition partner of Ishiba's ruling Liberal Democratic Party, as well as the heads of opposition parties, including Constitutional Democratic Party of Japan chief Yoshihiko Noda. "We achieved an agreement that serves both countries' national interests while protecting what we should protect," Ishiba said at the beginning of the meeting. The opposition parties urged Ishiba to offer more details of the agreement. The U.S. government has not announced a 15% tariff for Japanese vehicles. Ishiba said that the Japanese and the U.S. governments agreed on the rate, but it was a matter of interpretation, according to an attendee at the meeting. On the purchase of 100 Boeing aircraft, the prime minister said that the government took the decision after consulting with Japan Airlines and All Nippon Airways. U.S. President Donald Trump has said that the U.S. side will receive 90% of profits from $550 billion in investments from Japan. He also has said that the U.S. government will examine the execution of the agreement every quarter. Ishiba confirmed that such discussions have taken place and that the Japanese side plans to examine the execution of the deal. Japan's top tariff negotiator, Ryosei Akazwa, enters the Prime Minister's Office in Tokyo on Thursday. | JIJI However, a document released by the Japanese government on Friday said that the nine-to-one profit-sharing split Trump touted will apply to only a limited set of Japanese investments in the U.S., with the split "based on each side's contribution and risk burden." A fact sheet released by the U.S. side also did not clarify when the new tariffs would go into effect, though Japan's top negotiator, Ryosei Akazawa, told reporters Thursday that it would likely be the same time as the deadline Trump had set for a deal. "The 15% 'reciprocal' tariff will likely take effect Aug. 1," Akazawa said, adding that Japan is not currently considering making the deal legally binding by incorporating it into a joint document-type agreement. At the talks with Ishiba, Noda demanded the compilation of a supplementary budget for fiscal 2025, saying that the U.S. vehicle tariff rate for Japan is up sixfold from 2.5%, the rate before the tariff hike. Ishiba said that the impact on the Japanese economy is uncertain without close analysis. He also said that the 15% tariff rate is lower than that for other countries, a relative advantage for Japan. "The difference in interpretations will be a problem," Noda told reporters after the meeting, referring to the lack of a joint document. The sentiment was echoed by Seiji Maehara, co-head of Nippon Ishin no Kai. "The content (of the agreement) is not detailed, and this is very risky," he said. Meanwhile, Yuichiro Tamaki, leader of the Democratic Party for the People, said that his party's early praise of the deal required rethinking. "We want to take back the compliment to the government that we made right after the agreement," he said. Komeito's Saito urged Ishiba to hold a summit with Trump "to avoid a misunderstanding." After the talks, Ishiba stressed that the government will firmly put the agreement into practice — another signal that the prime minister will not be stepping down soon despite growing calls for him to do so. "I felt the prime minister's strong wish to remain in his post," Tamaki said. Over the U.S. tariffs, parliamentary affairs chiefs of the LDP and the CDP agreed to hold a Lower House Budget Committee meeting, possibly on Aug. 4. The populist right-wing party Sanseito, which had a strong showing in the recent Upper House election, was represented at the party leader meeting for the first time. The heads of Reiwa Shinsengumi and the Japanese Communist Party were also present.
NHK
2 hours ago
- NHK
UN Security Council holds private meeting over Thailand-Cambodia border clashes
The United Nations Security Council has met behind closed doors amid border clashes between Thailand and Cambodia. While Cambodia has called for an immediate ceasefire, Thailand is urging a resumption of dialogue through bilateral mechanisms. The emergency meeting took place on Friday at Cambodia's request. Details of what was discussed at the meeting remain unknown. Cambodia's ambassador to the UN spoke to reporters after the meeting. He said Cambodia asked for an immediate unconditional ceasefire, and also called for a peaceful solution of the dispute. The ambassador also said members of the Security Council called on both parties to exercise maximum restraint and resort to a diplomatic solution. Thailand's permanent representative to the UN released the statement he had delivered at the meeting. The representative told the Security Council that "Thailand condemns in the strongest possible terms Cambodia's indiscriminate and inhumane attacks" on civilian infrastructure. He also said that "Thailand urges Cambodia to immediately cease all hostilities and acts of aggression, and resume dialogue in good faith." The military clashes erupted on Thursday in the disputed border region between the two countries. Thai authorities say at least 14 people are dead, and Cambodia's defense ministry spokesperson says that 13 people, including eight civilians, are dead.
