Finimize - 💔 Investors dumped Japan

What’s going on here?

China turned reactive when Japan dumped nuclear wastewater into the Pacific Ocean, and now Japanese stocks have a hazard warning.

What does this mean?

Japan started dumping treated radioactive water from the damaged Fukushima nuclear power plant into the Pacific Ocean last week. Naturally, that’s got China a little on edge. The country’s already done a hard pass on any water-based Japanese products, and Chinese citizens are taking to the web to demand a complete boycott of all Japanese goods. But even without a full blanket ban, Japan’s international companies are in hot (and possibly toxic) water: Shiseido Co., a high-end cosmetics company, watched its stock fall more than 2% to land at a nine-month low last week. To add salt to the wound, the country’s main index – full of firms less dependent on consumer demand – notched a 1.5% climb.

Why should I care?

For markets: Let’s kiss and make up.

Shiseido’s already suffering from demand drying up, and this stand-off could impact more than makeup. Plenty of Japan's major industrial brands rely on Chinese sales: including Panasonic, Uniqlo, Mitsubishi, Aeon, Nomura, Nissan, and Toyota. Mind you, China’s hardly got a track record of keeping boycotts up for long, so these share sell-offs might not stick around.

The bigger picture: Japan’s dump could just be a dip.

Japan’s had a better year than most, with changes in monetary and corporate policies enticing international investors – including the one and only Warren Buffett. All that attention pulled the country’s stock market to its highest point since the early 1990s. And even if the market stumbles in the short term, you can bet investors will pounce if they spy cheaper prices. Remember, too, that Chinese consumers are tripping up a lot of the world. China’s slow economy means the country’s shoppers are strapped for cash, and that’s an issue for other global trading partners like Australia, South Korea, and Europe.

What’s going on here?

Data out on Monday measured the amount of money trading hands in Europe, but you’ll have to look real close to spot it.

What does this mean?

The European Central Bank (ECB) measures the amount of money circulating around the eurozone, which includes folks’ deposits, loans, and savings. And this July, that cash was down 0.4% from the same time last year – the first time it’s shrank since 2010. More often than not, smaller numbers mean consumers are borrowing less. No surprises there, then: today’s higher interest rates are making borrowing more expensive. So without as much cash in their pockets, Europeans are spending less. And in a bid to keep money coming in, stores and services will likely start pulling down their prices. That’s not necessarily a bad outcome, though: the ECB’s rate hikes were designed to calm heady inflation, and this could be a sign that the plan’s in motion.

Why should I care?

For markets: Europe needs a break.

In theory, Europe's shrinking cash piles could hint at lessening inflation. We won’t know for sure until Thursday, though, when August’s eurozone inflation figures are released. That data will be a chunky talking point when the ECB debates future hikes at its September meeting. And while the decision’s still anyone’s guess, one takeaway’s for sure: Europe’s economy is slowing down, and the ECB will need more than a pause in hikes to jolt it back to life.

Zooming out: America’s close… ish.

Thing is, central banks will only start slicing rates when they’re absolutely sure inflation’s in check. Right now, the US is closest. But still, at the Federal Reserve’s latest meeting, inflation was deemed too high to pause rates. In fact, officials are open to another hike instead. So don’t hold your breath if you’re waiting for lower rates to push stocks into a rally or bring down your mortgage.