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Global Outlook

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  1. Global Outlook

  2. Global Outlook - GDP 2009 2010 2011 2012 Global -2.2 3.8 3.9 3.5 Developed -3.5 2.6 3.0 2.9 US -2.6 2.8 3.6 3.0 Euroland -4.0 1.7 1.8 1.9 Japan -5.2 4.3 2.5 2.0 Emerging 1.3 7.1 6.1 6.0 Asia 5.6 9.0 7.7 7.5 China 9.1 10.3 9.6 9.0 Europe -5.3 4.0 4.0 4.6 Latin -2.4 6.0 4.5 4.1 Source: JPMorgan ; Jesper Koll

  3. Global Outlook - CPI 2009 2010 2011 2012 Global 1.3 3.4 3.5 3.5 Developed 0.6 1.5 1.8 1.8 US 1.5 1.2 1.5 1.6 Euroland 0.4 2.0 2.0 1.9 Japan -2.0 -0.5 0.0 1.0 Emerging 3.9 5.6 5.9 6.2 Asia 2.7 5.0 5.0 5.0 China 0.7 4.7 5.6 4.5 Europe 6.2 6.6 7.2 5.8 Latin 5.3 6.7 7.7 7.8 Source: JPMorgan ; Jesper Koll ; note  Oct-Dec compared to Oct-Dec previous year

  4. Japan Inc. :V-Shaped Profit Recovery

  5. 2011 Focus – Labor Market

  6. Sweet-Spot 55 Yen 65 Age 40-45

  7. Why Japan ?

  8. No Lost Decade Relentless Focus on Research & Development Spending (total R&D spending by public and private sector as % of GDP) Japan Japan US US Germany Germany France Source: National Institute of Population and Social Security Research Source: NIPSSR

  9. Global Patent Applications 2004 2009 US 43,350 45,790 + 2,440 Japan 20,264 29,827 + 9,563 Germany 15,214 16,736 + 1,522 Korea 3,558 8,066 + 4,508 China 1,706 7,946 + 6,240 Total 122,610 155,900+33,290 Source: Jesper Koll ; Wolrd Intellectual Property Organization

  10. Who is Afraid of China ? Percent of each countries exports that compete head-to-head with Made-in-China Products in the US market Source: C.H.Kwan – RIETI / NRI ; Jesper Koll & Merrill Lynch estimates for 2009

  11. Cool Nippon Do You Think This Country’s Products Are “Cool”? Response By Consumers In Different Cities Source: Nikkei Note: China=Beijin, Shanghai, Guangzhou

  12. Japan Profit Sensitivity 1% Domestic Growth  5% 1% Global Growth  18% 10% Yen Move  10% Note: Jesper Koll Calculations

  13. Legacy Problem Fiscal Deficit Forced BoJ Balance Sheet Expansion “Normalizing” both BoJ and Fiscal Policy Forces Volatility Source: National Institute of Population and Social Security Research Source: BoJ and Mikuni & Company

  14. Problem: Inefficient Tax System Tax Multiplier Japan 0.4 Euroland 0.9 Germany 0.9 US 1.0 Korea 1.3 OECD 0.9 Note: Tax Multiplier is the average over past three years, 2005-2007 ; based on OECD estimates

  15. International Students in US Total Graduate School Japan 33,974 6,862 = 20% Korea 69,124 24,677 = 36% India 94,563 68,280 = 72% China 81,127 53,057 = 65% Germany 8,907 3,670 = 41% Source: Institute for International Education ; Jesper Koll

  16. Yes, The Yen Floats On Water Source: Washington Post

  17. Who’s Got The Power? Top Heavy - Stagnant Middle – Declining Front-End Population by Age Groups – Million People Source: METI

  18. Upside Down Debate • Interest Rates & Fiscal • Demographics & Employment • Agriculture • Taxes

  19. Problem: Inefficient Tax System Tax Multiplier Japan 0.6 Euroland 0.9 Germany 0.9 US 1.0 Korea 1.3 OECD 0.9 Note: Tax Multiplier is the average over past three years, 2005-2007 ; based on OECD estimates

  20. Excess Liquidity !

  21. No Return to Big Government Post-Koizumi leaders must cut rising social security, debt service and local transfers   unpopular Japan Fiscal Spending By Major Category Source: MoF Note: FY 1965-1996: Settlement, FY 2006: Initial Budget

  22. Budget Realities

  23. Radical Break ?

  24. Poor Japan Private Wealth Barely Covers Public Deficit : All Public Debt can be paid off with 93% of Household Financial Assets Japan Net Household Financial Assets and Public Sector Debt As % of GDP Source: US Federal Reserve, Michal Taylor, Jesper Koll

  25. Rich America Private Wealth Far Exceeds Public Deficit : All Federal Debt can be paid off with 41% of Household Financial Assets US Net Household Financial Assets and Public Sector Debt As % of GDP Source: US Federal Reserve, Michal Taylor, Jesper Koll

  26. Upside Down Debate Growth = Kapital + Labor + Innovation US Europe Japan China

  27. AgriculturalReform

  28. Legacy Problem Fiscal Deficit Forced BoJ Balance Sheet Expansion “Normalizing” both BoJ and Fiscal Policy Forces Volatility Source: National Institute of Population and Social Security Research Source: BoJ and Mikuni & Company

  29. AgriculturalReform

  30. Real EstateBOOM

  31. Appendix

  32. The New Japan New Economic Reality – New Social Reality End 2010 Unemployment 5% 6% Back to 3.5% Unemployment : 2-years Growth (2011-12) 2.8 3.8 3-years Growth (2011-13) 2.0 2.8 Source: Jesper Koll ; Local Stats Offices

  33. The New America New Economic Reality – New Social Reality End 2010 Unemployment 9% 10% Back to 6% Unemployment : 2-years Growth (2011-12) 5.1 6.5 3-years Growth (2011-13) 4.1 5.0 Source: Jesper Koll ; Local Stats Offices

  34. Money Matters Financial Asset Growth Multiplier – Ratio to GDP Growth US 1985-95 1996-06 07 Loans 1.8 2.3 2.1 other credit 1.2 3.8 5.8 total 3.0 6.1 7.9 Japan 1980-85 1985-90 87 Loans 1.2 2.1 3.7 other credit 0.5 0.9 1.1 total 1.7 3.0 4.8 Source: Jesper Koll ; BoJ & Fed

  35. Bold Bernanke xx Base Money / GDP Source: Various Government Agencies – Morgan Stanley

  36. Global Supply-Side Revolution----> End of Cold War Frees Up New Investment Opportunities ; ----> Global Flow of Goods and Services Accelerates; ----> Third Industrial Revolution Think the Unthinkable ! Break The Rules ! Be Scared ! Source: Jesper Koll

  37. Globalization = China Challenge Compared to Past Economic Empire Transitions, The China Challenge Is Huge Source: IMF ; Jesper Koll

  38. Global Reality :From Cost Competition Brand Value 中国 Lower Cost

  39. Global Reality :To Ruthless Brand Competition Brand Value Toyota Geely LowerCost

  40. No Lost Decade Relentless Focus on Research & Development Spending (total R&D spending by public and private sector as % of GDP) Japan Japan US US Germany Germany France Source: National Institute of Population and Social Security Research Source: NIPSSR