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Global Outlook
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Global Outlook - GDP
20092009 20102010 20112011 20122012Global -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
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Jesper Koll
Global Outlook - CPI
20092009 20102010 20112011 20122012Global 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
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Japan Inc. :V-Shaped Profit Recovery
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2011 Focus – Labor Market
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Age
Yen
40-45
55
65
Sweet-Spot
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Jesper Koll
Why Japan ?
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Jesper Koll
No Lost Decade
Source: National Institute of Population and Social Security Research
Relentless Focus on Research & Development Spending(total R&D spending by public and private sector as % of GDP)
Source: NIPSSR
Japan
US
Germany
France
Japan
US
Germany
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Jesper Koll
Global Patent Applications
20042004 20092009US 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 +33,290Source: Jesper Koll ; Wolrd Intellectual Property Organization
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Who is Afraid of China ?Percent of each countries exports that compete head-to-head with Made-
in-China Products in the US market
1990 1995 2000 2005 2009e
Japan 3 8 16 25 29
Korea 25 28 37 50 55
Taiwan 27 40 50 78 81
Singapore 15 19 35 45 51
Indonesia 49 60 68 72 78
Malaysia 37 37 47 72 79
Philippines
42 46 46 75 82
Thailand 36 48 56 77 85
Source: C.H.Kwan – RIETI / NRI ; Jesper Koll & Merrill Lynch estimates for 2009
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Jesper Koll
Cool NipponDo You Think This Country’s Products Are “Cool”?
Response By Consumers In Different Cities
Source: Nikkei
Note: China=Beijin, Shanghai, Guangzhou
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Jesper Koll
Japan Profit Sensitivity
1% Domestic Growth 5%
1% Global Growth 18%
10% Yen Move 10%
Note: Jesper Koll Calculations
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Legacy Problem
Source: National Institute of Population and Social Security Research
Fiscal Deficit Forced BoJ Balance Sheet Expansion“Normalizing” both BoJ and Fiscal Policy Forces Volatility
Source: BoJ and Mikuni & Company
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Problem: Inefficient Tax System
Tax MultiplierTax MultiplierJapan 0.4
Euroland 0.9
Germany 0.9
US 1.0
Korea 1.3
OECD 0.9Note: Tax Multiplier is the average over past three years, 2005-2007 ; based on OECD estimates
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International Students in US
TotalTotal GraduateGraduate SchoolSchoolJapan 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
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Yes, The Yen Floats On Water
Source: Washington Post
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Jesper Koll
Population by Age Groups – Million People
Source: METI
Who’s Got The Power?Top Heavy - Stagnant Middle – Declining Front-End
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Jesper Koll
Upside Down Debate• Interest Rates & Fiscal
• Demographics & Employment
• Agriculture
• Taxes
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Jesper Koll
Problem: Inefficient Tax System
Tax MultiplierTax MultiplierJapan 0.6
Euroland 0.9
Germany 0.9
US 1.0
Korea 1.3
OECD 0.9Note: Tax Multiplier is the average over past three years, 2005-2007 ; based on OECD estimates
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Excess Liquidity !
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Jesper Koll
Japan Fiscal Spending By Major Category
Source: MoF Note: FY 1965-1996: Settlement, FY 2006: Initial Budget
No Return to Big GovernmentPost-Koizumi leaders must cut rising social security, debt service and local
transfers unpopular
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Jesper Koll
Budget Realities
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Jesper Koll
Radical Break ?
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Jesper Koll
Japan Net Household Financial Assets and Public Sector DebtAs % of GDP
Poor Japan
Source: US Federal Reserve, Michal Taylor, Jesper Koll
Private Wealth Barely Covers Public Deficit : All Public Debt can be paid off with 93% of Household Financial Assets
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Jesper Koll
US Net Household Financial Assets and Public Sector DebtAs % of GDP
Rich AmericaPrivate Wealth Far Exceeds Public Deficit :
All Federal Debt can be paid off with 41% of Household Financial Assets
Source: US Federal Reserve, Michal Taylor, Jesper Koll
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Jesper Koll
Upside Down DebateGrowth = Kapital + Labor + Innovation
US
Europe
Japan
China
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Jesper Koll
AgriculturalReform
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Jesper Koll
Legacy Problem
Source: National Institute of Population and Social Security Research
Fiscal Deficit Forced BoJ Balance Sheet Expansion“Normalizing” both BoJ and Fiscal Policy Forces Volatility
Source: BoJ and Mikuni & Company
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Jesper Koll
AgriculturalReform
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Jesper Koll
Real EstateBOOM
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Appendix
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The New Japan
End 2010 UnemploymentEnd 2010 Unemployment 5%5% 6%6%
Back to 3.5% Unemployment :
2-years Growth (2011-12) 2.8 3.8
3-years Growth (2011-13) 2.0 2.8Source: Jesper Koll ; Local Stats Offices
New Economic Reality – New Social Reality
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Jesper Koll
The New America
End 2010 UnemploymentEnd 2010 Unemployment 9%9% 10%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
New Economic Reality – New Social Reality
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Money Matters
US US 1985-951985-95 1996-061996-06 0707
Loans 1.8 2.3 2.1
other credit 1.2 3.8 5.8
total 3.0 6.1 7.9
JapanJapan 1980-851980-85 1985-901985-90 8787 Loans 1.2 2.1 3.7
other credit 0.5 0.9 1.1
total 1.7 3.0 4.8Source: Jesper Koll ; BoJ & Fed
Financial Asset Growth Multiplier – Ratio to GDP Growth
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Base Money / GDP
Bold Bernankexx
Source: Various Government Agencies – Morgan Stanley
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Global Supply-Side Revolution
----> End of Cold War Frees Up New Investment Opportunities ; ----> Global Flow of Goods and Services Accelerates ; ----> Third Industrial Revolution
Source: Jesper Koll
Think theUnthinkable !
BreakThe Rules !
Be Scared !
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Globalization = China Challenge
Source: IMF ; Jesper Koll
Compared to Past Economic Empire Transitions, The China Challenge Is Huge
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Global Reality : From Cost Competition
Lower Cost
BrandValue
中国
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Global Reality : To Ruthless Brand Competition
Lower Cost
BrandValue
Toyota
Geely
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No Lost Decade
Source: National Institute of Population and Social Security Research
Relentless Focus on Research & Development Spending(total R&D spending by public and private sector as % of GDP)
Source: NIPSSR
Japan
US
Germany
France
Japan
US
Germany
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Global Patent Applications
20042004 20092009US 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 +33,290Source: Jesper Koll ; Wolrd Intellectual Property Organization
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Patent Powerhouses
Panasonic 1,891 6%
Huawei Technologies 1,847 24%
Bosch 1,586 10%
Philips 1,295 29%
Qualcomm 1,280 3%
Ericson 1,240 34%
LG Electronics 1,090 14%
NEC 1.069 4%
Toyota 1,068 4%
Sharp 997 3%
Source: Jesper Koll ; Wolrd Intellectual Property Organization
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Cool NipponDo You Think This Country’s Products Are “Cool”?
Response By Consumers In Different Cities
Source: Nikkei
Note: China=Beijin, Shanghai, Guangzhou
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Japan Profit Sensitivity
1% Domestic Growth 5%
1% Global Growth 18%
10% Yen Move 10%
Note: Jesper Koll Calculations
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Source: Thomson Financial, Merrill Lynch
Global PlayerOutward M&A Accelerating Sharply
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US Net Household Financial Assets and Public Sector DebtAs % of GDP
Rich AmericaPrivate Wealth Far Exceeds Public Deficit :
All Federal Debt can be paid off with 41% of Household Financial Assets
Source: US Federal Reserve, Michal Taylor, Jesper Koll
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Japan Net Household Financial Assets and Public Sector DebtAs % of GDP
Poor Japan
Source: US Federal Reserve, Michal Taylor, Jesper Koll
Private Wealth Barely Covers Public Deficit : All Public Debt can be paid off with 93% of Household Financial Assets
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International Students in US
9898 0101 0404 0808Total 481,280 547,867 572,509 623,808
Japan 47,073 46,497 40,835 33,974
Korea 42,890 45,685 52,484 69,124
India 33,818 54,664 79,736 94,563
China 46,958 59,939 61,765 81,127
Germany 9,309 10,128 8,745 8,907
Source: Institute for International Education ; Jesper Koll
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Globalization at Home
WorkersWorkersStudentsStudents
US 13.4% 5.8%
England 15.9 25.7
Germany 11.4 12.4
France 12.4 11.7
Australia 28.9 28.6
Japan 0.7 3.5Note: Students = international university students relative to domestic high-school graduates
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Global Reality CheckGDPGDP Growth Growth $ Growth$ Growth
US 14.2 trn 2% 284 bn 284bnJapan 4.9 trn 1% 49 bnASIA 10.3 trn 5% 515 bn 564bn
China 4.3 trn 7% 301 bn
A-Tigers* 3.8 trn 4% 152 bn India 1.2 trn 5% 60 bn Australia 1.0 bn 2% 20 bn
Euroland 13.6 trn 1% 136 bn 216 bnNew Europe 1.6 trn 2% 32 bnRussia 1.6 trn 3% 48 bn
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The New America
End 2009 UnemploymentEnd 2009 Unemployment 9%9% 10%10%
Back to 6% Unemployment :
2-years Growth (2010-11) 6.1 7.5
3-years Growth (2010-12) 5.1 6.0
Source: Jesper Koll ; Local Stats Offices
New Economic Reality – New Social Reality
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US Capital Stock – Age & Growth
Capex – Poised For Recoveryccc
Source: US Bureau of Economic Analysis, Michal Taylor, Jesper Koll
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US Equity Earnings
America Inc = More Than FinanceNon-Financial Earnings Very Strong
Source: Morgan Stanley – G. Miniack
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US Profits – Global versus Local
Made By AmericaAbout 60% of US corporate Profits Are Sourced Globally
Source: Morgan Stanley – G. Miniack
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Jesper Koll
Upside Down Debate• Interest Rates
• Employment
• Agriculture
• Taxes
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ImpossibleI’m Possible
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Jesper Koll
JapanOptimist
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Global GDP: V - Recovery
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世界が直面する問題
Kand
J
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Jesper Koll
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Jesper Koll
4.3% ?
X = 2/3D = 1/3