Mr. Jeff Bezos resigns

July 6, 2021 (Tuesday) Rain then clouds

・Reality of corporate governance (1) Managers and shareholders: A serious match

Six years have passed since the Corporate Governance Code (corporate governance guidelines) was introduced to revitalize Japanese companies.

Shareholders’ meetings have become a serious arena where management and shareholders clash over their positions.

Shareholder proposals have doubled, and more than 20% of resolutions against company proposals have followed.

Even when performance and stock prices are strong, shareholders may vote against the top management at the general meeting if they believe the governance system is flawed.

IR Japan <6035> [closing price 14,010 yen] reports that at the June 2020 general meeting, 314 proposals received more than 20% opposition votes.

・The government is coordinating to extend the deadline for the "priority measures to prevent the spread" of COVID-19.

It is assumed for Tokyo and the three prefectures of Saitama, Chiba, and Kanagawa where infections are resurging. A decision will be made on the 8th.

・In the Tokyo Metropolitan Assembly election held on the 4th for voting and polling, the Liberal Democratic Party and Komeito together failed to secure a majority of seats.

Governor Yuriko Koike’s regional party "Tomin First no Kai" could not maintain first place but came close to the LDP in seats.

It became clear that independents who answered “No party preference” had dispersed investments.

According to exit polls by Nikkei newspaper, 25% of independents voted for Tomin First.

Next were the Communist Party 18%, Constitutional Democratic Party 15%, and the Liberal Democratic Party remained at 15%.

・Public and private sectors began to move to ease the supply-demand squeeze for COVID-19 vaccines.

On the 5th, the Ministry of Health, Labour and Welfare decided to expand the distribution of excess vaccine supplies to medical institutions.

This would allow smaller portions to be sent to other facilities from the initial recipients.

・A new framework is starting to promote climate change responses in emerging economies through cooperation between Japan, France, and Germany, with private and public sectors involved, funded from the outset.

Asset management giant BlackRock in the U.S. will create a fund to support infrastructure development such as renewable energy,

with participation by public institutions such as the Japan Bank for International Cooperation (JBIC).

The scope of projects could expand from hundreds of billions to trillions of yen.

・China’s internet regulators have started scrutiny of three domestic tech companies, including the ride-hailing giant DiDi, for national security reasons by the 5th.

All three share a common trait: they listed in the U.S. in June, and foreign investors among their major shareholders include American and other foreign firms.

There is a risk that this could negatively affect Chinese firms’ global growth.

・China’s authorities’ tightening of the online sector is also expected to impact SoftBank Group (SBG) [closing price 7,391 yen].

SBG, through its subsidiaries, has invested in many high-growth Chinese internet firms, including DiDi and various truck-dispatch platforms, and

will face strategic reconsideration, including potential increases in investments outside Chinese firms.

・Facebook, Twitter, and Google under Alphabet joined a industry association, the Asia Internet Coalition (headquartered in Singapore). On the 5th, they warned of possible service suspensions in response to the Hong Kong government’s data protection legislation revisions.

・Jeff Bezos, founder of Amazon.com, announced on the 5th that he would resign as Chief Executive Officer (CEO).

In 27 years since its founding, the company has had a significant global impact.

・The Ministry of Finance on the 5th announced that the FY2020 general accounting surplus, the difference between expenditures and revenues, was 4,539.3 billion yen—the highest on record.

Tax revenue reached a record 60,821.6 billion yen, and unspent budget appropriations grew.

The surplus is likely to be used as a source of funding for government and ruling-party economic measures through a supplementary budget.

・The shortage between supply and demand due to COVID-19 is improving.

Bank of Japan <8301> [closing price 31,000 yen] on the 5th reported that the 1–3 quarter GDP gap, indicating demand versus potential supply in the economy, was minus 1.37%.

With vaccinations progressing and the economy reopening, the United States likely had excess demand in Q2, and Japan is expected to turn positive within this year.

The key question is how much household and corporate excess savings will be spent on consumption and investment.

・Bank of Japan <8301> [closing price 31,000 yen] on the 5th released the July Regional Economic Report (Sakura Report).

In nine regions nationwide, two regions (Hokuriku and Kinki) were upgraded, while two regions (Chugoku and Shikoku) were downgraded.

・The market is seeing a withdrawal from the UK in financial activities.

The pound hit a record low in May in currency shares for international settlements such as trade and remittance.

European stock market activity has contracted. Following Brexit, financial institutions are leaving, and foreign direct investment is shrinking.

・New hedge fund investment activity is surging again.

According to U.S. hedge fund research (HFR), the number of new hedge fund launches worldwide in Q1–Q3 reached 189 funds, the highest quarterly level since Oct–Dec 2017.

Overall hedge fund performance in 2020 was strong, with investor inflows anticipated.

Conversely, 159 funds shut down in Q1–Q3. The total number of funds rose for three consecutive quarters to 8,092.

・Disputes escalate in Indonesia between Chinese and Japanese construction equipment majors.

As growth in the Chinese market slows, Sany Heavy Industry in China accelerates overseas expansion to seek new revenue.

Komatsu, a mainstay in Southeast Asia, [closing price 2,777.0 yen] counters by launching mid-range machines and expanding maintenance bases.

・North Korea’s food shortages are becoming severe.

Last year’s floods and the disruption of cross-border trade between China and North Korea have driven up grain prices in rural areas.

Kim Jong Un appears worn and struggles to maintain popular support as party officials are replaced in what is described as a “major incident.”

・The Biden administration plans to complete a review of its nuclear weapons policy by early 2022.

The previous Trump administration advanced development and deployment of small nuclear weapons, but expanding deployment of small nukes could raise the risk of nuclear war, so a downsizing is being considered.

・Nikkei and the Japan Economic Research Center survey Asia-based economists on economic outlooks in the "Asia Consensus,"

with the ASEAN Five expected to grow by an average of 4.1% in real GDP in 2021, down 0.2 points from the previous March survey.

ASEAN Five economies: 2020 -4.8; 2021 4.1 (previous 4.3); 2022 5.2 (5.5); 2023 4. (4)

Indonesia 2020 -2.1; 2021 4.1 (3.9); 2022 4.9 (5.4); 2023 5.1 (5.0)

Malaysia 2020 -5.6; 2021 4.1 (5.3); 2022 6.5 (6.5); 2023 5.3 (5.1)

Philippines 2020 -9.6; 2021 4.3 (5.2); 2022 6.2 (6.0); 2023 5.5 (5.7)

Singapore 2020 -5.4; 2021 6.9 (6.1); 2022 3.9 (4.6); 2023 2.6 (2.5)

Thailand 2020 -6.1; 2021 1.9 (2.6); 2022 4.9 (5.3); 2023 3.7 (3.1)

India 2020 -7.3; 2021 9.7 (11.2); 2022 7.5 (6.3); 2023 6.4 (6.2)

・Global COVID-19 infection numbers (new cases and deaths) as of 4 PM on 7/5, compiled by Johns Hopkins University: global total 1.837 billion cases (5,982 deaths)

United States 33,717,574 (33) India 30,585,229 (723) Brazil 18,769,808 (830) France 5,848,171 (9) Russia 5,544,209 (650) Turkey 5,440,368 (0)

United Kingdom 4,920,168 (15) Argentina 4,535,473 (310) Colombia 4,350,495 (582) Italy 4,263,317 (12) Spain 3,833,868 (0) Germany 3,738,470 (-)

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