PSA Japan Weekly Research Round-Up (week ending Aug 24, 2018)

The Weekly Comment by Pelham Smithers
If Japan can remain in a 1% growth, 1% inflation state, then with the US nudging towards further tightening, the yen drifts lower against the dollar, boosting earnings and setting the Japanese markets up for a strong end to FY18.

Company / Sector / Thematic Comments at a Glance
1. Sony (6758 JP): PSVR Cume 3mil Units
2. Tesla (TSLA US) Denies Panasonic (6752 JP) Solar Cell Exclusivity Existed
3. Government Considering Subsidies to Accelerate Cashless Payments
4. Nikon (7731 JP) Unveils the Z6 and Z7, Threatening Sony’s (6758 JP) Mirrorless Market
5. Hitachi High-Technology (8036 JP) Worth Considering
6. Nissan Chemical (4021 JP) Shares Recovering Despite Roundup Issues
7. Japan Begins Talking About Cutting Plastic Waste
8. Sony (6758 JP) Wins a Round Against Fujifilm (4901 JP) in Backup Tapes
9. Mitsubishi Chemical (4188 JP) Invests in IC Production Services
10. Much Hype about NAFTA Talks
11. Japan and China to Cooperate on Charging Standards: Good News for Japanese Automakers
12. Japanese Automakers Increase Capacity in China ahead of Market Deregulation
13. Continental’s (CON GY) Profit Warning Adds to Autos Sell-Off
14. Suzuki (7269 JP) Walks Away from China
15. A Fanuc (6954 JP) Downgrade
16. Fujitsu General (6755 JP) Up on the Heat
17. Technical Upside for KHI (7012 JP)?
18. LDP Suggesting 40% Cut in Phone Bills?
19. Kitanotatsujin (2930 JP) to Review Some Product Ad Campaigns
20. iStyle (3660 JP) Looks Attractive Given Recent Sell-off
21. Mercari (4385 JP) Down 25% Since Earnings Release
22. Kakaku.com (2371 JP): Uninteresting
23. July Department Store Sales Down, Supermarket Up
24. IPO Market Reflecting Retail Sentiment as well as Impact of Global Monetary Policy Trends

PSA Company Visits, Tours and Interviews
• Visited: Fujifilm Holdings (4901 JP), Nitto Denko (6988 JP), Showa Denko (4004 JP), Mitsubishi Chemical Holdings (4188 JP), Zeon Corp (4205 JP), Mitsui Chemicals (4183 JP), Nissan Chemical (4021 JP), Kuraray (3405 JP), Kitanotatsujin (2930 JP)

Weekly Market Comment by Pelham Smithers
Japanese CPI for July came out at 0.9% YoY, thereby just managing to avoid catching the eye by hitting 1.0%. However, we are probably going to be watching this and other macro data quite closely from now on, to see how much longer we can remain in an economic Goldilocks state. The good news – as evidenced by the move in the currency this week – is that if Japan can remain in a 1% growth, 1% inflation state, then, with the US nudging towards further tightening, the yen drifts lower against the dollar, boosting earnings.
It may not seem like it, but sell-side analysts are actually more currently confident about FY18 earnings in Japan than they were at the start of the year. Bloomberg consensus EBIT/shr for Topix has risen from ¥175 to ¥178 for FY18 while the FY19 figure has risen from ¥188 to ¥190. These are not huge moves, but in a year when Topix is down 6% without valuations having been stretched at the start, that the move is positive is in itself noteworthy.