"Axygen's product portfolio and established distribution network will significantly strengthen Corning's life sciences platform and are critical components to our long-term growth strategy for this business," said Peter F. Volanakis, Corning's president and chief operating officer. "We believe this highly strategic acquisition offers synergies that will allow us to grow our life sciences business to more than $500 million in revenue by 2011," he added.

Improved Outlook

Corning also recently updated its outlook, announcing that it expects sales volume at its wholly owned business to be down by less than 5% in the third quarter, compared to the quarter-prior. The forecast is an improvement from the previous projection of a decline of 5% to 10% decline.

The company previously stated that production would be adversely impacted by an earthquake at a factory in Shizuoka, Japan, southwest of Tokyo, adding that the disruption will cut sales for the quarter by about $25 million and result in $22 million worth of charges because of damages. Management also said the restart of the Shizuoka plant is on track.

Higher Forecasts

The Zacks Consensus Estimates are on the rise. Full-year projections of $1.25 are above last month's $1.18. For 2010, analysts polled by Zacks are calling for earnings of $1.51 per share, versus the 1 month-ago level of $1.48.

Read the Sept 09 commentary on GLW.

Last Week's Growth and Income Zacks Rank Buy Stocks

Ross Stores, Inc. (ROST) recently reported August sales of $557 million, an increase of 11% year-over-year. Same store sales climbed 6% from last year. Management noted that healthy back-to-school traffic helped deliver the better-than-expected sales gains. Read the full story on ROST.

J & J Snack Foods Corp. (JJSF) continues to see bullish Zacks Consensus Estimates on strong fundamentals. Analysts are calling for 2009 earnings of $2.13 per share and 2010 earnings of $2.34, which translates into 10% growth. Read the full analysis on JJSF.

NewMarket Corporation (NEU) continues to see higher Zacks Consensus Estimates as it trades near a 52-week high. Analysts polled by Zacks are calling for 2009 earnings of $8.14 per share, an increase of 30% over the past 2 months. Read the full analysis on NEU.

DeVry Inc. (DV) announced record results in mid-August. Fourth-quarter earnings per share of 55 cents topped the Zacks Consensus Estimate by 8% and surpassed the year-prior result. Revenues of $396.2 million came in 43% ahead of last year's total. Read the full analysis on DV. Zacks Investment Research

(quote Bloomberg)

Japanese businesses cut spending for a ninth quarter as the global recession squeezed profits, underscoring the challenge for the incoming government to sustain a recovery from the country’s worst postwar slump. Capital spending excluding software fell 22.2 percent in the three months ended June 30 from a year earlier, after dropping a record 25.4 percent in the previous quarter, the Finance Ministry said today in Tokyo. Profits slid 53 percent.

Sales fell 17 percent, the second-biggest drop on record, indicating global demand hasn’t recovered enough to encourage companies to buy more plant and equipment. Sanyo Electric Co. and Seven & I Holdings Co. are among businesses scaling back. “Companies have too many resources, and until that situation changes, they won’t have to invest in more equipment and they won’t need to hire more people,” said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo.

(click on graphs for better viewing)

On a y-o-y and q-o-q basis, the sales of Japanese companies fell 17% and 4.5% respectively. Especially, manufacturing in general and machinery and equipment producers saw a rapid decline in sales. Investment in plants and equipment fell back sharply on an annual as well as a quarterly basis at 21.7% and a full 39.1% respectively. The pronounced fall in Q2 investment owes itself to an abnormally large outlay in Q1 2009 which has consequently been paired in the period just ended. As can be seen in the graphs to the right, the manufacturing sector has been hit much harder than the non-manufacturing sector which is not difficult to understand if you think about the fact that it is this sector of the Japanese economy which is most exposed to the external environment. This is to say, that the manufacturing sector's  top line is very sensitive to external conditions on the margin. Between Q4-08 and Q2-09 the cumulative drop in Japanese manufacturers sales was a whopping 35% almost double that of the non-manufacturing sector's corresponding toll of a drop of 18%.

With respect to investment in plants and equipment (corporate capex) the picture is, interestingly, the reverse with the investment by the non-manufacturing sector falling much more sharply during the present turmoil. On a four quarter moving average basis, the change in investment in plants and equipment for of the non-manufacturing sector has been falling ever since the first quarter of 2006 with a cumulative drop of 37%. The corresponding number for the manufacturing sector shows that the investment of plants and equipments have been falling since the third quarter of 2007 with a cumulative drop of 19%.

Finally, in the context of operating profits (that is, profits derived soled from the company's primary operations), the non manufacturing sector is still well in the black whereas the manufacturing sector has moved from a figure much below average in Q4-2008 to outright red figures in Q1-09 and Q2-09. Between Q1 2000 and Q3 2009 the average quarterly profit (nominal) for Japanese manufacturers was a little over 4 billion Yen.

In Q4 2008, the consolidated profit read 761 million yen and in Q1-09 and Q2-09 the numbers had turned into an outright decline with negative profit of 3.5 billion and 645 million respectively. Conversely, the non-manufacturing sector was, albeit still below average, performing much more strongly with solid black numbers throughout the crisis.

No Recovery Here

While there certainly may be places the newly elected party to rule Japan can look for green shoots and evidence of an impending recovery in Japan, corporate capex and profit numbers are not one them. Neither are, of course, the labour market, the deflation debacle, as well as the household sector which leaves us with the obvious question of where then? Second quarter clocked in better than most had expected and ironically, despite the analysis fielded above, upbeat signals from industrial production and the manufacturing sector in general are cited as the main reason. I will let my readers judge for themselves by perusing the graphs above and then also note the following crucial point made by Soc Gen's Gleen B. Maquire in one of their recent economic outlook reports (my emphasis);

The bulk of the contribution to growth came from net exports. Exports increased by 6.3% qoq while imports declined by 5.1% qoq. Overall, net exports contributed 1.6ppt to Q2 growth. The recovery in the Japanese economy is starting to look eerily similar to the 2001-03 recovery when Japan emerged ahead of Europe and the US. This is largely a China dynamic with Japan’s exports to China (and indirectly to the rest of Asia) recovering in step with China’s stimulus measures coming on line.

(...)

Industrial production is responding to robust demand from China for capital equipment and
industrial goods as well as tentative signs of a recovery in the durable goods cycle within Asia and globally.

So, this appears to be an export story in which case positive news from Japan should not surprise us at all. Macquire goes on to argue that since Q2 did not see a bounce back in inventories from the sharp de-stocking of Q4-08 and Q1-09 this, expected, bounce in inventories. I remain skeptical of this claim since I don't necessarily believe that the new level of growth will necessarily support any rapid re-stocking of inventories, but time will of course tell very soon.

Finally and specifically in relation to the analysis above, it is also interesting to ponder the discrepancy between the manufacturing and non-manufacturing sector in relation to the idea of Japan being dependent on exports to grow. Clearly, the manufacturing sector's higher sensivity with respect to the financial crisis and its top line makes sense since external conditions deteriorated very rapidly. Conversely, the domestic economy of Japan was not struck by a major, and relatively large, credit crunch. Hence, we see the top line of non-manufacturers relying more on domestic demand decline less. On the other hand, in relation to corporate capex the manufactures' slump in investment is very exclusively tied to the financial crisis while that of the non-manufacturers seem much more broad based. Once again can we rationalize this through the idea that the manufacturers remain tied to external conditions while that of the non-manufacturers is increasingly tied to the domestic market.

So, does this last niggle make sense? I am not sure, but it would be an interesting thing to check.

We believe this is a very lucrative business proposition for IBM, as the company will be working for the Chinese government, which creates a win-win situation by generating substantial business for the company and by producing high value local jobs.
 
We believe the introduction of this new analytics center is inline with the company’s business strategy. IBM opened its first two analytics solution centers in Berlin and Tokyo this year, and plans to open other centers in London, New York and Washington, D.C.

The company also plans to have 4000 global analytics workforce professionals. It seems that the company is really focusing on its analytics business and China as a global delivery destination for the company.
 
In the month of July, IBM launched a cloud computing hub in Wuxi, China. Wuxi may be a small city in China, but for IBM the city has great importance, as the company is making a move to make it a global cloud computing hub, and will attract billions of dollars of government funding.

So it can be inferred that China is becoming a preferred destination for IBM, due to its proactive government, and skilled workforce. Besides, we believe Business Analytics and Optimization and Cloud Computing will help drive the next cycle of growth and productivity for the company and its clients.

The deal was signed with a premier Japanese manufacturing company for an undisclosed amount. With the deal, the facility at ProLogis Parc Ichikawa II is currently 82% leased. The company anticipates leasing the remainder of the facility before the scheduled inauguration in November 2009.

The site is strategically located near Tokyo and provides customers with immediate access to transportation facilities through major national expressways, such as the Wangan Expressway and the Keiyo Expressway. On completion, ProLogis Parc Ichikawa II would turn into a five-storied building spanning 790,000 square feet, with facilities including a cafeteria and a convenience store.

ProLogis owns and manages interests in over 2,500 distribution facilities, service offices, and properties spanning 475 million square feet of space (including properties under development). As of Mar 31, 2009, the company had 201.1 million square feet of direct-owned industrial properties -- 85.9% of which were located in North America, 11.1% in Europe, and 3.0% in Asia.

With approximately 8.2 million square feet of distribution space (both completed and under development) and 98 acres of land for future development, ProLogis is one of the largest providers of distribution facilities in Japan.

Its major customers in the country include Yamato Logistics -- a leading logistics company in Japan; Daikin Industries -- a diversified manufacturing company; Costco (COST) -- the largest membership warehouse club chain in the world based on sales volume; and Kintetsu World Express -- a leading air and ocean freight company.

Despite the continuing economic downturn, ProLogis has the wherewithal to sign new leases across the globe. The company also has a strong balance sheet to fuel further growth. We reiterate our Buy rating of the company.

As part of my upcoming master's thesis I am naturally trying to combine these traits and it should come as no surprise that the focus is on demographics and international capital flows. That will not be the topic of this entry however. Rather, I thought that I would plug a recent paper on global ageing [1] by Wolfgang Lutz Warren C. Sanderson, and Sergei Scherbov published in the brand new journal, Journal of Population Ageing, edited by the team of demographers, Sarah Harper and George Leeson, at the Oxford institute of Ageing (Oxford University). Also, this would naturally be a nice occasion to ever so slowly reveal what I am arguing in the context of my own research; research which is naturally heavily affected by the likes of Lutz, Malmberg, Lee, McDonald and other of our time's great (econ)-demographers. [Graphs are made by the author and not taken from Lutz et al.]

With respect to Lutz et al they set out to grapple with one of the most difficult issues in the context of demographics and ageing in the form of our ability to forecast the future trends of ageing in the context of the global economy and different regions. The main conclusions indicate a rapid and, in some cases, accelerating process of population ageing in a global context in the next decades as well as a the very likely outcome that global population growth will cease to exist as a lingering phenomenon in the century which follows. Here is their abstract;

Population ageing is, in the first instance, a demographic phenomenon; although its consequences go far beyond demography. But the future trends of ageing are not yet known and many of the consequences of ageing will depend on the future speed and extent of ageing. Here we summarize what is already known and what is not yet known about future ageing trends in different parts of the world. We do this through the means of new probabilistic population forecasts. The section ‘New Regional and Global Probabilistic Population Forecasts’ presents the results of those forecasts. They confirm the earlier finding (Lutz et al., Nature, 412(6846), 543–545, 2001a) that it is highly likely that the world’s population growth will come to the end during this century. The following four sections present results for proportions of populations 60+, old age dependency ratios, proportions 80+ and average ages. In the section ‘New Measures of Ageing’, we analyse a new measure of ageing that takes life expectancy changes into account.

The first question which immediately springs to mind (or at least it did to me) is first and foremost what kind of techniques the authors are using in their endeavors to actually make forecasts on a variable as complex as ageing and so far into the future. Well, this is also where water gets muddied since it is important to realize, a priori, the amount of uncertainty which are attached to the kind of exercise Lutz et al. embark on. As most of you will know ageing is driven by the joint process of declining fertility and increasing life expectancy (and to some extent migration) and once we use this break down to operationalize ageing it gets dreadfully difficult to forecast although there are tentative conclusions which can be drawn based on existing evidence. In this way, it is important to dwell at the main conclusion, namely that the world as a whole is set to age rapidly before heading off into more specific forecasts.

The formal technique used by Lutz et al. is probabilistic forecasting which is basically a technique of collecting random draws from existing data on fertility, mortality and migration in order to produce a series of potential distributions and paths which can ageing can take as we move forward. Lutz et al. center on five simulations. The first in the context of total population size, the second on the proportion of people aged 60+, the third focuses on dependency ratios, the fourth turns the attention to the proportion of people aged 80+ and the final simulation centers on average age.

In relation to the first simulation which focuses on population growth it appears certain that the global population will continue to grow up until 2030-2050 depending on the path you look at. Beyond that point the simulations become extremely insecure ranging from a continuation of population growth to a decline in population growth which will restore the global population level at its 2000 level in the year 2100. Needless to say that such exercises are largely pointless from the point of view of inference about e.g. economic effects. However, what seems to survive as a main conclusion is that it is very likely that the tendency of population growth will come to an end some time during the next century, something which is significant in its own right in a world where the discourse on global warming, in my opinion, risks to engender policy advice to emerging economies which are essentially ill informed.

With respect to the paper in general I take away the following points in random order.

• The potential importance of migration. In this regard, it is worthwhile to have a look at the simulated path for population growth (and thus in some sense the change in age structure) for Eastern Europe and Sub-Saharan Africa. As many of you will have guessed the former shows a steady decline (rapid ageing) from 2010 and onwards whereas the latter is set to increase (in all probability) towards the year 2050 (and beyond). Although uncertainty remains it is undoubtedly true that in a world of complete equalization of factor returns and with no barriers (of any kind!) to labor flows a lot of the detrimental impacts from ageing could be mitigated. Having said this though, I still want to emphasise the importance of managing the transition in an emerging market context since all evidence points towards a much more rapid move towards below replacement levels once economic development sets in. In short, population managment policies need to look at both sides of the coin.

• A rapid increase in the proportion of 60+. Perhaps this is the most striking aspect of the coming process of ageing and whether we concur with the actual forecasts, there is no doubt that the change in age structure measured as an increasingly large share of, in this case, people aged 60+ is going to be extraordinary. According to Lutz et al. by 2040 the probability of the entire of Europe (CEE+Russia), Japan/Oceania as well as China having more than a third of its population aged 60+ is over 80%. This raises some extremely important important questions which researchers are only now starting to focus on. What happens to the labour supply of people in the 60s-70s? How does the life cycle of the young adjust to the skewed age distribution and what about that of the "old"? How should life expectancy be calibrated into the issue of raising retirement age for this growing age group? What happens to the productivity profile of society? And of course, my favorite; how will these changes be transmitted through capital flows both in a time series perspective (i.e. for the individual economy) as well as of course in a cross sectional perspective where the fact that all surpluses and deficits must add up act as a decisive binding constraint on the ability of some economies to smooth consumption and investment optimally.

• The analysis on old age dependency (60+/20-59) ratio mirrors the points above to a large extent, but leafing through some of the tentative conclusions e.g. in the context of Japan and China I am pretty amazed, if not scared, by the projections. Especially, in the context of the former some of the projected paths would quite literally mean that the market economy (with associated welfare structures) will cease to exist. The interesting thing about the latter (China) is of course that for all the hopes about China ascending to take over the baton of the US as the sole global leader, most people are missing the fact that the country, in all likelihood, is going to catch up (and surpass) large parts of the OECD in terms of ageing as soon as the 2020-2025 mark.   

• Turning the attention to the forecasted share of people aged 80+ my own opinion is that this is pretty useless. I mean, I salute the effort but as the authors themselves point out; once we incorporate the long time horizons (up to 2100!) and most importantly the extreme uncertainty surrounding future mortality evolutions for this age group (both in terms of life expectancy at birth as well as on a cumulative basis for the people alive today) the uncertainty takes on huge proportions. What we know naturally is that the number will increase substantially, but also that it is likely to do so following a concave function of time as one would assume the extra gain in life expectancy gets smaller. [2].

Now, as Lutz et al never tire of pointing out throughout their excursion into the world of forecasting population ageing, this is all very uncertain and for two reasons primarily. Firstly, there is the inherent uncertainty associated with forecasting and essentially mapping changes in fertility, mortality, and migration. Secondly, there is the effect from moving the goal posts, or in this case; the reference points in relation to ageing. The simple point here is that it is not certain that old will mean the same thing tomorrow as it does today. This is especially the case of course if mortality continues to decline.

If this concludes the look on the paper by Lutz et al. I think it is worthwhile to produce something of an apology. Consequently, I have on several occasions pointed towards the futility (and in some cases stupidity) of narrating demographic changes in the context of what might and might not happen once the calendar shows 2050. Yet, here I even venture something about the state of affairs in the year 2100. An explanation is in order I think.

First of all, I maintain my view that the most important issue with respect to population ageing is the period one or two decades forward in time. Even if we might be able to plausibly say something interesting about ageing beyond this point the economic effects from ageing are correspondingly almost impossible to map. One good example here is the supposed asset meltdown scenario which is supposed to hit us in 2040-2050 as the weight of older age cohort's dissaving pushes up real interest interests and floods the market with assets (i.e. disinvestment) for which there is not a significant amount of takers. Not only do researchers only scantly understand what is actually meant by dissaving, there is also reason to believe that although optimal from an individual's life cycle perspective dissaving is not optimal from the point of view of an ageing society writ large [3].

With this general point in mind it is also worth recognizing a fundamental pre-requisite for focusing on ageing, namely the fact that the demographic transition is not over. It is ongoing and given the fact that the coming age of ageing which was initiated somewhere in the late 1960s (in the context of the OECD) it means that fertility will not stabilize at replacement levels. Despite the obvious reality of this point and the subsequent need to adjust models, views and analyses accordingly many still assume for example that global fertility, by some form of magic, is imbued with a drift parameter that will take it to replacement levels in the year 2100. Let me state as clearly that I can that such assumptions are completely useless. Interestingly and as a short digression, demographers have been focusing on this for quite some time and although the people at the UN, arguably, are getting better I would still recommend anyone interested in this to go back to the seminal volume edited by Jones et al and look up the chapter by Demeney where he ties the UN Population projections of the time up in knots. He essentially rams home the point that replacement fertility constitutes, in his own words, an implausible endpoint of the demographic transition. This is an extraordinarily important point to take aboard.

In fact, I would take all this a step further.

In most modern accounts of the demographic transitions the traditional process is amended by an additional phase, or transition if you will, called the second demographic transition Van de Kaa (2002)[4] (or phase of ageing Lee (2003)). Now, I tend to take a more drastic approach. Quite simply I think that the transition need to be revamped all together and that a focus on ageing and age structure should be adopted at the offset. In this sense I think that Malmberg and Sommestad (2000) is a very important starting point since this the most comprehensive contribution which maps the whole transition in the context of ageing (specifically using Sweden). Working from this I believe that we can narrate the demographic transition in a way which makes it much more likely for us to use it to make inferences on economic processes which is ultimately my goal even if the study of demographics is a fascinating area in itself.

With respect to the question implicitly posed by Lutz et al. and thus how much we actually know about the global and regional process of ageing the initial answer has to be that we know quite a bit. Most importantly, you have to remember that ageing is not a new phenomenon and as I would argue a lingering aspect of the entire transition. The key is what happens next to mortality, fertility and migration and here uncertainty is vast although I should stress yet again that idea of convergence towards homoestasis in which these parameters are constant is not a desirable way to look at demographic processes. If we want to model this and if we want to make solid economic inference we need to take into account a myriad of feedback loops as well as the path dependency of the transition. With this end point it is perhaps apt to recall Socrates who reminded us of the fact that knowing that one knows nothing or very little is actually knowing quite a bit. 

---

For more on population ageing, the Economist had an interesting briefing on the issue a couple of weeks ago which touches on some of the same points as above and provides some nice examples and cases. Finally, I also think that I should plus Georg Magnus' book the Age of Ageing which is really also a nice introduction for the intermediate laymen. In terms of academic papers that offers a general introduction to the issue of modern population dynamics and ageing Lee (2003) is a must, but also this paper by David S. Reher is very good (I discuss the paper here). Hopefully, I will have my own contribution to offer soon which sets the demographic transition in the context of economics and how it should understood in order to best make the connection to the study of economic phenomena.

List of References

Harper, Sarah and Howse, Kenneth (2009) - An Upper Limit to Human Longevity?, Journal of Population Ageing, Vol 1, issue 2.

Magnus, George (2008) - The Age of Ageing, Wiley

Malmberg, Bo and Lena, Sommestad (2000) – Four Phases of the Demographic Transition, ”Implications for Economic and Social Development in Sweden 1820-2000” Arbetsrapport/Institut för Framtidsstudier; 2000:6. The paper was presented at the SSHA meeting in Pittsburg. October 2000.

Lee, Ronald (2003) – The Demographic Transition – Three Centuries of Fundamental Change, Journal of Economic Perspectives vol.17 issue 4, pp. 167-190 fall 2003

Lutz, Wolfgang; Sanderson, Warren C; and Scherbov Sergei (2008) - Global and Regional Population Ageing - How Certain Are we of its Dimensions, Journal of Population Ageing vol 1, issue 1. '

Reher, David S (2007) - Towards long-term population decline: a discussion of relevant issues, European Journal of Population

Van de Kaa, Dirk J. (2002) – The Idea of a Second Demographic Transition in Industrialised Countries, National Institute of Population and Social Security, Tokyo, Japan 29 January 2002

Notes

[1] - The paper is walled for non-subscribers, and I can't of course upload a version here, but mail me and we can discuss the paper "further" if you like ...

[2] - Although it should be noted here that in a recent literature survey on human longevity by Sarah Harper and Kenneth Howse evidence is provided, from Japan, that mortality shows no sign of "compression" at older ages which indicate a linear rather than a concave function.

[3] - I will have much more about this in my next posts where I respond to this.

[4] - The idea of the SDT dates back to the 1980s and earlier works by Van de Kaa as well as Boongaarts.

Chicago, IL – July 13, 2009 – Zacks Equity Research highlights Heinz (HNZ) as the Bull of the Day and Xtent, Inc. (XTNT) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Boeing (BA), Caterpillar (CAT) and Microsoft (MSFT).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

Growth in Heinz’s (HNZ) domestic businesses, strengthening international operations, and the reallocation of resources in favor of key brands are major positive trends for the company.

Despite cost pressure from higher commodity costs, strong pricing of 3.5% to 4.5% has allowed the company to report positive earnings surprises in the last twelve quarters. Management expects net sales to increase by 4% to 6% in fiscal 2010 driven by new product introductions and positive pricing.

In addition, the stock's valuation is attractive. The Buy rating is maintained.

Bear of the Day:

Xtent, Inc.’s (XTNT) Custom NX drug eluting stent (DES) Systems treats coronary artery disease (CAD), the leading form of cardiovascular disease and major cause of death in the U.S. and Europe. CAD accounts for over 650,000 annual deaths and affects over 13 million people in the U.S.

The company received CE mark approval for the product. However, commercialization of the product in Europe may be delayed due to the company's shortage of funds.

As such, we lowered our near-term revenue estimates and downgraded this stock to a Sell.

Latest Posts on the Zacks Analyst Blog:

Trade Deficit Declines

Yes, it is nice to see imports decline, particularly things like oil imports, but it would be far better if we were reducing the deficit by selling more abroad, rather than buying less here. If there were some evidence that the reason for the reduced imports was that we were making more of what we consume here, say by buying Chevys built in Detroit rather than Hondas built in Tokyo (or Hondas build in Tennessee, for that matter), it might be a different story.

However, it appears that the reduction in imports is just another reflection of weak overall demand. The change in the balance of industrial goods and materials (including oil) was a very significant part of the year over year improvement, with our monthly import bill falling by 34.9 billion while our monthly exports were down by $11.0 billion. In other words, this category was responsible for $23.9 billion -- or 72.6% -- of the total improvement on a year-over-year basis.

Net imports (aka the trade deficit) is a direct input into the GDP numbers. The improvement in the May trade deficit will be an important factor in making the second quarter GDP growth decline much less than the 5.5% decline we saw in the first quarter. Since our exports are by definition the imports of some other country, the fact that demand for them is rising might indicate that the rest of the world is also starting to find its economic footing (although it would show up as a negative in their national income accounts, just as it helps ours).

I find the rise in actual exports to be a very encouraging sign. It might just be signaling some light at the end of the tunnel for major U.S. exporters like Boeing (BA), Caterpillar (CAT) and Microsoft (MSFT).

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

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Currently only Phase I of the outlet, known as Ami Premium Outlet, spanning 225,000 square feet of gross leasable area, has been opened to the general public. Ami Premium Outlet is the eighth outlet of the JV in Japan, the others being Gotemba Premium Outlets and Sano Premium Outlets (both serving Tokyo), Rinku Premium Outlets (Osaka), Kobe-Sanda Premium Outlets (Kobe-Osaka), Sendai-Izumi Premium Outlets (Sendai), Toki Premium Outlets (Nagoya) and Tosu Premium Outlets (Fukuoka).

Ami Premium Outlet is strategically located in the close proximity of Ami-Higashi interchange on the Ken-O Expressway (Metropolitan Inter-City Expressway) and Narita International Airport. The outlet is presently leased to leading shopping brands like Adidas, Beams, Coach, Diesel, Fauchon, Ray Ban, Tommy Hilfiger, True Religion and Viaggio Blu.

With a current equity market cap of $11.8 billion, Simon Property is by far the largest publicly traded regional mall company in the US. Its largest competitors are Taubman Centers Inc. (TCO) and Macerich Co. (MAC) with equity market caps of about $1.22 billion and $1.14 billion respectively. Simon Property’s international presence gives it a more compelling long-term growth story than its domestically focused peers. We reiterate our Buy rating of the company.

Japan’s consumer prices fell at a record pace in May, adding to the risk that deflation will become entrenched and hamper a rebound from the nation’s worst postwar recession. Prices excluding fresh food slid 1.1 percent from a year earlier after dropping 0.1 percent in the preceding two months, the statistics bureau said today in Tokyo. It was the sharpest decrease since comparable figures were first compiled in 1971.

Bank of Japan Governor Masaaki Shirakawa said last week that price declines will accelerate through the middle of the fiscal year as demand slackens and crude oil continues to trade lower than last year’s record. Retailers including Aeon Co. are cutting prices to attract customers as falling wages and the worsening job outlook damp spending. “Profits fall, then wages come down, then consumers stop shopping,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “And because people aren’t shopping, companies lower prices. That’s the process that we’re starting to see. It isn’t easy to break out of.”

Now, you might think that this sharp decline has fuel/energy prices written all over it. In some sense this is true. In May, fuel prices registered its first annual drop in several months (-3.0% yoy) which clearly adds to the headline grapping number. Yet, the decline in prices in Japan is broadbased and although the -1.1% is clearly pushed down by a high base effect as we enter a period in which 2008 energy prices were comparatively large, the core of core index slid -0.5% which marks a change of -0.4% from the previous month. In short; the recession in Japan is beginning to push the economy into the dark hole it has spent nearly two decades trying to escape (and never really managed). The point here is not to harp about headline inflation and whether it will go up or down since we are clearly going to be in situation over the next couple of months in which headline deflation on an annual basis will skew the overall index downwards. But this is hardly the point since, as we can see, the core or core index is declining fast too which tells us that domestic demand pressures in Japan are clearly negative at this point in time and may remain so for as far as the eye of a trained economist should be willing to see.

Japan may be sinking into deflation that will undermine the nation’s rebound from its worst postwar recession, the Cabinet Office’s chief economist said. Deflation “will exert a significant amount of downward pressure on the recovery,” Jun Saito, an adviser to Economic and Fiscal Policy Minister Kaoru Yosano, said in an interview yesterday in Tokyo. “An increase in deflationary expectations will raise real interest rates and that will restrain business investment.”

Consumer prices excluding fresh food dropped a record 1.1 percent in May from a year earlier, the statistics bureau said today, spurring concern that the economy is slipping back into the deflation that plagued the nation for a decade until 2005. “Declining prices will mean lower profits, less investment and wage cuts that will weaken consumer spending further,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co.

So, where do we go from here you might ask. Well, this is exactly the issue; there isn't a whole Japan can do at this point but to try to position itself in the best possible ways for exploiting the global green shoots through exports. However, when it comes to the domestic economy deflation is an inbuilt part of the edifice.

Yesterday, Wall Street responded with a yawn to Obama Administration's announcement that 10 of the largest banks could repay $68 billion of government bailout cash.  Although Treasury Secretary Geithner, appearing before the Senate Appropriations Committee, noted the repayment of the bailout money was a sign of "financial repair," stocks swung back and forth in a narrow range, signaling the much-expected announcement from the Treasury packed few surprises.  Technology stocks, buoyed by Texas Instruments' (NYSE:TXN) better-than-expected earnings and sales outlook, pushed Nasdaq higher while the Dow Jones Industrial Average and broad based S&P 500 index ended the day mixed.  The Tech-heavy Nasdaq rose 17.73 points, or 0.96%, to close at 1860.13.  The DJIA slipped about 0.1% to close at 8,763.06.  The S&P added 0.4% to close at 942.43. 

Some big financial institutions have been eager to escape increased federal involvement and the restrictions that come with being part of the Troubled Asset Relief Program.  Although the Treasury did not name the banks cleared to pay back the TARP funds, the ten institutions quickly confirmed they have been allowed to exit the government's financial assistance program.  Morgan Stanley (NYSE:MS), American Express (NYSE:AXP), JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), Bank of New York Mellon (NYSE:BK), BB&T (NYSE:BBT), Capital One (NYSE:COF), Northern Trust (NASDAQ:NTRS), State Street (NYSE:STT) and US Bancorp (NYSE:USB) were cleared to pay back the rescue funds.  Commenting on the move, JP Morgan Chase & Co (NYSE:JPM) CEO Jamie Dimon noted, "Paying back TARP at this time is the right thing for JPMorgan Chase, and it's the right thing for our country."  Financial sector shares edged up 0.4%, with American Express (NYSE:AXP) topping the list of gainers on the DJIA with a 5% jump, as traders were relieved that the industry's rising rates of card delinquencies and the potential for increased attendant loan losses had not prevented government approval of its repayments.

Following Texas Instruments' (NYSE:TXN) improved guidance, semiconductor shares rallied with Advanced Micro Devices (NYSE:AMD) closing up 3.1%, Intel (NASDAQ:INTC) rising 3.4%, and National Semiconductor (NYSE:NSM) closing up 4.4%. According to a Bank of America (NYSE:BAC) analyst note, Microchip Tech (NASDAQ:MCHP) has been witnessing improved China orders.  BofA raised its price target on the company to $23.

Crude prices went beyond $70 per barrel on hopes a stronger economy will lift demand.  Dollar prices continued to remain under pressure.  Although concerns linger over the state of the world economy, commodities have recorded sharp gains recently as investors have increasingly turned towards crude to hedge against a weak dollar.  Yesterday's $35 billion auction of 3-year Treasuries met with strong demand, however, as a yield of 1.96% topped expectations, and the bid-to-cover ratio equaled 2.8%. Today's calendar is for $19 billion in 10-year notes, with $11 billion 30-years slated for tomorrow.  However, investors remain concerned that rising short-term interest rates will squeeze banking industry's net interest margins, in a sector that has already seen a 73% price run-up over the past three months.

Meanwhile, late Tuesday, the Supreme Court rejected an appeal from three Indiana state funds, consumer groups and others, clearing the way for the sale of most of Chrysler's assets to Italy's Fiat Group SpA. 

Afternoon sentiment will reflect release of the Fed's latest take on regional economic conditions, revealed in its Beige Book at 2:00 AM ET. The report is likely to recount the well-aired areas of economic weakness, namely, depressed housing markets, soft consumer demand, deteriorating employment opportunities, and downward price pressures. Indications of an economic recovery's "green shoots" of growth may help boost sentiment.