Bull run for Japan stocks at risk, warns boss of biggest trading house

{"text":[[{"start":8.4,"text":"Corporate Japan must work harder for investors or risk derailing a record stock market boom as bonds become more attractive, the head of its largest trading house has warned."}],[{"start":18.950000000000003,"text":"Mitsubishi Corporation chief executive Katsuya Nakanishi said that both his company and the wider market needed to deploy cash more efficiently — either by investing in future growth or returning it to shareholders."}],[{"start":34.050000000000004,"text":"His warning comes as the Nikkei 255 stock market index has doubled in 18 months, but investors are also being lured by bond yields hitting a 31-year high."}],[{"start":45.85000000000001,"text":"The trading house boss said he was increasingly concerned about how investor appetite for Japanese stocks would be affected by the end of the ultra-low rates era."}],[{"start":55.400000000000006,"text":"“We’re changing from a zero interest rate era to a positive interest rate era. The 10-year government bond is 3 per cent, so it’s a choice of buying bonds or equities,” he told the FT. “I think there’s a problem unless we pay more attention to cash efficiency.”"}],[{"start":69.75,"text":"The comments from one of Japan’s top business leaders underline concerns that bond market turbulence, partly driven by Prime Minister Sanae Takaichi’s spending plans, could end the Nikkei 225’s bull run. The index hit a record high above 72,000 points in June but has faltered in recent months."}],[{"start":89.75,"text":"Strategists have warned that Japanese equities could feel the blowback from rising bond yields. "}],[{"start":95.4,"text":"Shusuke Yamada, chief Japan foreign exchange and rates strategist at Bank of America, said last month that a “meaningful correction” could occur for the equity market and become a “big issue” if rates rose above 3.5 per cent."}],[{"start":110.35000000000001,"text":"Japan’s five largest trading houses have been glowing from the halo effect of having Berkshire Hathaway as their biggest shareholder. "}],[{"start":117.85000000000001,"text":"With the share price surge eliminating the conglomerate discount, analysts say that Japan’s trading houses now need to convince shareholders that they can extract higher profits from portfolios that span copper mines, salmon farms and convenience stores."}],[{"start":null,"text":"

"}],[{"start":132.45000000000002,"text":"Mitsubishi’s return on equity — a key measure of a company’s ability to generate profits from shareholders’ money — is forecast to reach 11.5 per cent this financial year, up from 8.5 per cent. It is targeting more than 12 per cent on ¥1.2tn ($7.5bn) of net income by next year."}],[{"start":152.60000000000002,"text":"Steps to improve return on equity include reviewing strategic options for 160 underperforming businesses, taking on more debt financing and a ¥1tn ($6.3bn) share buyback last year."}],[{"start":167.8,"text":"In the AI era, Nakanishi said that Mitsubishi needed to hone a “liberal arts” mentality to gain an edge over narrow specialists or algorithms acting solely on data."}],[{"start":179.05,"text":"He cited examples of using insights on climate change from salmon farming to inform LNG trading, or trying to deploy loyalty systems used by its convenience chain Lawson to European energy supplier Eneco to boost customer retention."}],[{"start":195.4,"text":"Nakanishi’s comments followed Mitsubishi committing $3.2bn to the second phase of LNG Canada this week. "}],[{"start":203.6,"text":"The major gas export project will strengthen energy security in Asia and further diversify the trading company’s global LNG footprint."}],[{"start":212.9,"text":"The Mitsubishi boss said that LNG Canada could help Japan replace supplies from Russia’s Sakhalin-2 as its reserves deplete if utilities do not renew their supply contracts. However, he emphasised that Japan would make no sudden exit from the controversial project."}],[{"start":238.10000000000002,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1791167406_6965.mp3"}