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MarketScreener Homepage  >  Equities  >  Xetra  >  Allianz SE    ALV   DE0008404005

ALLIANZ SE

(ALV)
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Allianz : Japan's pandemic-hit economy too weak for new PM's reform plans - PIMCO

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09/16/2020 | 04:32am EDT
FILE PHOTO: A PIMCO sign is shown in Newport Beach

Japan's new leader Yoshihide Suga will struggle to push through structural reforms as they would be too painful for an economy hit by the coronavirus crisis, said an executive of PIMCO, one of the world's largest investment firms.

Tomoya Masanao, head of the Pacific Investment Management Co's (PIMCO) Japan arm, also said the Bank of Japan's ultra-loose monetary policy will allow the government to continue ramping up spending, but not without huge costs.

Since adopting in 2016 a policy capping borrowing costs, the BOJ's policy is essentially financing public debt and is integrated into the government's debt-management strategy, Masanao said.

"It's impossible for the BOJ to make an independent decision on exiting ultra-easy policy. Any move toward an exit would need to take into account the impact on long-term interest rates and fiscal policy," he told Reuters on Wednesday.

California-based PIMCO, a unit of German insurer Allianz, managed 12.84 trillion yen (94.45 billion pounds) in assets for Japanese clients as of June 2020.

Suga, who was elected as new prime minister on Wednesday, has vowed to break barriers that hamper competition and pursue reforms to revitalise the world's third-largest economy.

If successful, Suga would provide the missing third arrow of his predecessor Shinzo Abe's "Abenomics" policies that consisted of bold fiscal, monetary easing and structural reforms.

But Masanao said he was doubtful Suga can push through painful reforms, when there is little fiscal and monetary ammunition left to support an economy hit by COVID-19.

"Abenomics succeeded in boosting growth and jobs, which was why Abe stayed in power for so long. But he didn't use the political capital to push through reforms," Masanao said.

"Suga also has a structural reform agenda. But the point is you need to first reflate the economy to undertake real reforms, which are by nature deflationary at least in the short run."

Japan deployed two huge spending packages, accompanied by monetary easing steps by the BOJ, to cushion the blow from the pandemic that pushed the economy into deep recession.

By successfully capping borrowing costs at zero, the BOJ will likely allow the government to keep spending massively without causing an unwelcome spike in inflation, Masanao said.

But maintaining huge fiscal and monetary support for too long could distort market pricing and hurt Japan's productivity by hampering reallocation of resources to growth areas, he said.

"The unintended consequences of prolonged ultra-loose policy are huge, most notably by distorting asset prices," Masanao said. "It's eliminating the chance of proper market pricing."

With interest rates sliding across the world, Pimco is neutral on Japanese government bonds (JGBs) in its global portfolio, he said.

Pimco is also "somewhat under-weight" on super-long JGBs as the BOJ is seen allowing the longer end of the curve to move more flexibly and help steepen the yield curve, Masanao said.

By Leika Kihara and Takahiko Wada

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Financials
Sales 2020 142 B 165 B 165 B
Net income 2020 6 235 M 7 254 M 7 254 M
Net Debt 2020 22 181 M 25 806 M 25 806 M
P/E ratio 2020 10,5x
Yield 2020 6,01%
Capitalization 66 687 M 77 480 M 77 583 M
EV / Sales 2020 0,63x
EV / Sales 2021 0,61x
Nbr of Employees 147 268
Free-Float 99,8%
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Mean consensus OUTPERFORM
Number of Analysts 26
Average target price 208,98 €
Last Close Price 161,98 €
Spread / Highest target 59,3%
Spread / Average Target 29,0%
Spread / Lowest Target 8,04%
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NameTitle
Oliver Bäte Chief Executive Officer
Michael Diekmann Chairman-Supervisory Board
Christof Mascher Chief Operating Officer
Giulio Terzariol CFO, Head-Finance, Controlling & Risk
Gabriele Burkhardt-Berg Vice Chairman-Supervisory Board
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