The 2014 All-Japan Research Team: Fixed-Income Strategy, No. 1: Naka Matsuzawa
First-Place Appearances: 3
Total Appearances: 3
Analyst Debut: 2012
Nomura’s Naka Matsuzawa is the top fixed-income strategist in Japan for a third consecutive year, thanks in part to “his knowledge of Japanese government bond demand and supply,” says one money manager, who also credits “his good sense of the Bank of Japan’s actions.” Matsuzawa, 47, describes yields as “extremely stable” and anticipates that they will remain so until the central bank delivers additional easing, which he forecasts will happen between May and July. In the meantime, the central bank’s JGB-buying scheme, expanded to ¥50 trillion ($488 billion) annually last April, has resulted in a tightening of the market. Investors are reluctant to sell the bonds, he explains, because it’s unclear what further actions the BoJ will take to push inflation up to its target of 2 percent, a rate not seen since late 2008. This time around, the analyst expects, the bank will instead increase its purchases of exchange-traded funds that hold Japanese stocks. Once it acts, yields “will become suddenly very volatile,” he says. Until then, since JGB yields are currently not attractive, especially compared with those of their overseas counterparts, and are not reflective of growth and inflation fundamentals, Matsuzawa adds, “the question is not whether but when we reduce Japanese government bonds and move money into foreign bonds.” He advises investors to sell sovereigns on the market rally when the Bank of Japan starts to drop hints about a new round of easing, noting that he is “particularly bearish” on 20- and 30-year instruments versus ten-year maturities. The central bank is buying almost all the issuance in the shorter tenures but less than half of the superlongs, he adds, and with the fiscal year that began this month, issuance of the 30-years will be increased by ¥1.2 trillion annually, as part of the government’s efforts to extend the average maturity on its massive debt. “I like his solid analysis of Japan’s fundamentals,” declares another booster.