Norihiro Fujito - Mitsubishi UFJ Morgan Stanley Securities

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Last quote by Norihiro Fujito

Lately, the Nikkei has been even more sensitive to foreign exchange market moves than it is to U.S. stocks. And every time it moves higher, some investors who bought at lower levels earlier this year rush to take profits.feedback
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May 26 2017
We can learn a lot about a person if we know what types of things he or she talks about or comments on the most frequently. There are numerous topics with which Norihiro Fujito is associated, including U.S., Nikkei, and market. Most recently, Norihiro Fujito has been quoted saying: “Political risk in Europe has been considered as a major market theme this year. But in the Netherlands (anti-EU party leader Geert) Wilders lost in March. The French election is now out of the way. And in Germany the ruling Christian Democrats are recovering. The political risks in Europe have receded.” in the article Markets react positively to Macron victory.
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Norihiro Fujito quotes

The perceived expectations for a rate hike in March became even stronger when the market heard Brainard saying 'soon'. When the U.S. economy is strong, foreign investors' risk stance on investment in overseas shares strengthens.feedback

Investors are cherry-picking stocks of companies which will likely outperform in the next fiscal year. It's not like they are tilted towards defensive stocks or cyclical stocks... Even in cyclical stocks there are divided views and investors are cautious against increasing exposure to the auto sector now.feedback

Although there was no tough talk on trade at the meeting, we are likely to see a comprehensive economic talk between Japan and the United States in April, when U.S. Vice President Mike Pence is expected to visit Japan.feedback

Trade and defense will be in focus. We need to see if anything is said that has an effect on currencies, or on specific companies.feedback

The Japanese market started on a weak note but clearly some investors are trading on fundamentals.feedback

But on the other hand, he hasn't even started his job formally yet. And there are not many examples where the share prices peak out before the inauguration of a U.S. President.feedback

Some people are taking profits as they look at his protectionist, dark side of his policies.feedback

Investors are cautiously focused on Trump's potentially market-moving speech. If he points his finger at a specific Japanese company again, Japanese stocks may get hit so investors are staying on the sidelines today.feedback

Right now, even if banks are assisting, it's like they are throwing their money down the drain.feedback

In a holiday-thinned market, there are even fewer buyers today especially after we saw a sharp drop in the U.S. market. Nvidia is like a shining star which was attracting buyers lately, so its sharp drop sent shock across the sector, and Japanese chip testing machine makers which have been rising lately became a target of profit-taking.feedback

The yen's rebound last weekend had already put stocks on the defensive, and Italy's referendum provided participants to take profits on a market that rallied last week.feedback

The referendum result will have repercussions beyond Italy. But for now we have to see how the European and North American markets react to the vote outcome to get a clearer picture.feedback

We have to see how far the yen falls against the dollar before we can guess how far the Nikkei can rise. It's a very emotionally-driven market right now, chasing overseas factors, with everyone trying to gauge how strong the momentum is.feedback

If Japan gives spending a further boost in line with Trump's expected expansion, fiscal deterioration would be more of an issue in an economy with a debt-to-GDP ratio of 247 percent.feedback

Next week, we have events that would make investors more sober, such as OPEC meeting and Italian referendum. By then this Trump-inspired market may come to an end for now.feedback

I'm sure they (investors) will wake up to the reality that Trump has a protectionist view on trade policy, and it won't be good for Japan.feedback

Investors are partying around as Trump brought the punchbowl to the market.feedback

Most market participants have priced in expectations that Clinton wins the election. However, early votes will likely sway the market and will cause volatility today.feedback

Investors took risks in October. But they want to square their positions for now, and they may even short depending on upcoming developments in the U.S. election.feedback

Even if opinion polls show that Clinton is maintaining a lead, anything can happen at the last minute, something the Brexit outcome taught us.feedback

Foreign hedge funds, whose risk stances rose on the back of these reasons, may start to unwind their positions, so we need to watch carefully oil price and dollar-yen moves.feedback

The markets had relied on expectations of monetary stimulus for a long time but that is changing with bond yields rising around the world. You have rising interest rates and falling EPS. That's obviously bad for stocks.feedback

The OPEC move was a surprise, and left some hedge funds scurrying to cover their short positions.feedback

On any move above 16,700, there are institutional investors ready to take profits, and on the downside, there is the perception that Bank of Japan buying will come in on moves below 16,500 and support the market.feedback

By looking at the current dollar-yen levels, companies will likely have no choice but to lower their dollar-yen assumptions at their mid-year earnings releases.feedback

Exporters are bought although the yen is not particularly weak, so it's natural to assume that pension funds started buying after the Nikkei was seen as cheap below the 16,500-mark.feedback

Investors think that the Japanese market won't likely get positive catalysts from monetary policy in the U.S. or Japan.feedback

The Nikkei would have fallen 200-300 points without hopes for the central bank's ETF buying.feedback

A level of more than 70 billion yen in buying can be as big as a launch of a mutual fund. It's supporting the market, but the Nikkei could be trading 1,000-1,500 points lower than the current level when the currency market sees the 100-yen-per-dollar level.feedback

But when the market does not fall when it's supposed to fall, the upside is also likely limited.feedback

Looking ahead, expectations of BOJ ETF buying will support the market.feedback

Disappointment is still evident after the market priced in high hopes for government stimulus and monetary easing. Investors are still adjusting the bullish bets they made after the election.feedback

There are expectations for stimulus, and these are continuing to lift the market. Kuroda's BBC interview was recorded last month, before Brexit.feedback

It's natural to think that there was another factor beyond recovering global risk sentiment lifting the dollar which had been stagnant for a while.feedback

The market was convinced hundred percent that a tax hike will be delayed.feedback

Essentially, global shares and commodities have been rallying since U.S. Federal Reserve Chair Janet Yellen had indicated a dovish stance in March. But you would need more improvement in economic fundamentals for the rally to go further. The S&P 500 is quite overvalued, trading at 17.8 times the forecast profits. Disappointing earnings from hi-tech companies will surely cap the market.feedback

We didn't believe the 'world is going to end' story, but the way the mood has changed in the last couple of weeks is just crazy.feedback

Globally, markets are rolling back the extreme risk-off trading they did in January and February. Part of the reason is that the Fed seems to be easing its insistence on raising rates.feedback

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