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Wallex Industry Insights: Japan
In the land of the rising sun, a new dawn emerges for investors as the Nikkei charts unprecedented heights. Is Japan, renowned for its rich cultural heritage and technological innovation, poised for a financial renaissance?
In this edition of Wallex Industry Insights, we analyse what contributed to the rise of the Nikkei and examine the industries poised to ignite a revitalisation in the Japanese shares market.
Join us as we explore the intricate tapestry of Japan's economic landscape, including an in-depth look at the history and significance of the Nikkei index.
From its humble beginnings to its current status as a global economic barometer, we unravel the layers of this iconic index to provide a comprehensive understanding of its role in shaping Japan's financial future.
Quick Facts: What is the Nikkei?
- The Nikkei, otherwise known as Japan's Nikkei 225 Stock Average, is Japan’s leading stock index that comprises the top 225 blue-chip stocks in Japan.
- The Nikkei is the Dow Jones Industrial Average (DJIA) equivalent in the United States.
- The Nikkei is a price-weighted index, in which each component of the index is weighted according to its current share price (i.e. the index is an average of the share prices of all listed companies).
- Examples of notable companies featured in the Nikkei: Canon Inc, Honda Motor Company, Nissan Motor Company, Sony Corporation, Toyota Motor Corporation.
- The Tokyo Price Index (TOPIX) is another Japanese stock index that is a capitalisation-weighted index that includes all the stocks in the Tokyo Stock Exchang
🔑 Read More: The Wallex Country Report: Indonesia
History of the Nikkei
Originally known as the Nikkei Dow Jones Stock Average between 1975 and 1985, the index is now named after the Japan Economic Newspaper (Nihon Keizai Shimbun) – otherwise known as Nikkei – which finances the calculation of the index.
Calculations of the index began in September 1950, with data retroactively applied from May 1949. The Nikkei was inaugurated during Japan’s post-World War II reconstruction and industrialisation era. Unlike other indexes that are ranked by market capitalisation, the Nikkei’s constituent stocks are ranked by share price, with valuations denominated in Japanese yen. An annual review takes place every September to implement any necessary adjustments to the composition of the Nikkei.
Behind the Rise of Nikkei
Since 2024 started, Japanese stocks have surged to surpass the historic peak set over three decades ago, as global investors (majority of whom were first-time investors into the country) funnel funds into a nation they believe is finally emerging from deflation and is now on a trajectory toward sustainable economic expansion.
On 22 February 2024, the Nikkei 225 Index closed at 39,098.68, breaching its previous record. This surge was propelled by gains in technology stocks and semiconductor equipment manufacturers following Nvidia's impressive sales forecast. This remarkable resurgence, which exceeded even the duration of Wall Street's recovery from the crash that precipitated the Great Depression, signifies a revival for Japan's stock market.
But what exactly sparked this rise in 2024? Which industries were the main players behind this economic comeback? And what opportunities does this present to international businesses?
Amidst this resurgence, specific industries have played a pivotal role in driving Japan's economic growth. Our analysis will zoom in on these sectors, exploring how advancements in technology, particularly in the semiconductor and tech industries, have fuelled investor optimism.
Japan’s Manufacturing Sector
The growing optimism in Japan’s stock market is in large part due to the record earnings in the manufacturing sector, where aggregate net profits listed by Japanese manufacturers rose by more than 20%.
The automotive industry, in particular, has emerged as a powerhouse driving earnings growth within the manufacturing landscape. Profits of car manufacturers and related components surged by an impressive 95%, reaching that of 4.550 billion yen. This figure accounts for approximately 40% of the total earnings in the manufacturing sector, underscoring the pivotal role of the automotive industry in Japan's economic revival.
Notably, industry titan Toyota Motor witnessed net profits soaring 2.1 times to 3.950 billion yen in the first three quarters of the fiscal year. This remarkable growth trajectory can be attributed largely to robust sales of hybrid vehicles in the lucrative North American market, positioning Toyota as a frontrunner in driving the resurgence of Japan's automotive sector.
Japan’s Chip Industry
Japan’s official support for the semiconductor industry expenditure, relative to its GDP, is
Referencing a report by Nikkei News, Japan’s official support for the semiconductor industry expenditure, relative to its gross domestic product (GDP), far surpasses that of her counterparts such as the United States and other major Western countries.
Once a chip-making powerhouse, figures from the Japan’s Ministry of Finance’s Fiscal System Council reveal an investment of JPY 3.9 trillion (USD $26 billion) – equivalent to 0.71% of its GDP – to revive the semiconductor industry, with a strategic focus on chips used in the automotive sector.
Of this substantial amount committed, a third of it has gone to Taiwan Semiconductor Manufacturing Company, that promises to revitalise the unassuming Japanese farm town of Kikuyo into a key node in Asia’s chip supply chain.
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How international businesses can tap on Japan’s revitalised industries?
As Japan's manufacturing sector experiences a resurgence, international businesses have a prime opportunity to capitalise on the potential of the automotive industry’s strengthening position. With the automotive industry leading the charge, driven by robust profits, global companies can explore partnerships and expansion opportunities within Japan's dynamic market.
Additionally, Japan's commitment to revive its semiconductor industry presents a promising avenue for international businesses to tap into cutting-edge technology and innovation. By leveraging Japan's strategic focus on key sectors such as automotive and semiconductor manufacturing, international businesses can pivot their strategies to target the Japanese market and achieve sustained growth and success in one of the world's most vibrant economies.
🔑 Read More: Businesses Who Transformed Their Cross-Border Payments Experience With Wallex
Let Wallex be your trusted cross-border payment provider
As you extend the footprint of your international business globally, your need for a trusted cross-border payment specialist will only grow stronger.
Navigating the complexities of international payments, including fluctuating exchange rates and varying fee structures, are real and significant challenges. However, they should not be taking up your time, detracting you from focusing on growing your business.
In such a dynamic and competitive landscape, Wallex has been a proven cross-border payment partner for over 35,000+ clients and counting. To experience the Wallex difference, speak with us today!
How Could De-dollarisation Disrupt the Global Economy?
While it has yet to happen on a significant level, there are murmurs of de-dollarisation among nations who want to reduce their reliance on the US dollar. If such a movement were to gain momentum it could have significant implications for the global economic situation.
In this article, we will take a look at what some of these implications may be, how it affects other currencies, the way nations and businesses transact, and more.
Key Takeaways:
- De-dollarisation is the process of a country reducing its reliance on the USD in international transactions
- Such strategies may be motivated by concerns over the United States’ fiscal policies, economic performance, and geopolitical hostilities
- De-dollarisation could trigger market instability and shift the dynamics of cross-border trade
Understanding de-dollarisation
De-dollarisation refers to the process in which countries reduce their dependence on the US dollar and diversify their currency reserves. This movement has already gained some traction in recent years, with several countries taking steps to shift away from the USD in their economic dealings.
However, the US dollar has been the world’s reserve currency for over 70 years. Why would a country want to take the potentially risky decision to move away what is traditionally considered to the a safe haven?
Let's look at some key reasons.
1. Fears over stability
As it stands, the USD is the dominant currency in the world, and was used in nearly 80% of global trade between 1999 and 2019. This gives the US a huge amount of power when it comes to setting interest rates, trade policies and other economic factors. But this, alongside concerns over inflation and the United States' budget deficit, may create large fluctuations in its value, which can be concerning for countries who hold significant amounts of USD.
2. Geopolitical tensionand hostilities
Among other tensions, the United States and its partners such as the EU are often at loggerheads with countries such as China, Iran and Russia, which typically result in trade sanctions being levied. Countries on the receiving end of these sanctions would have reduced access global markets, causing economic disruption.
3. Rising economic competition
Being the second largest economy in the world has made the Chinese yuan one of the biggest threats to the USD, and the country is also actively leading heading efforts to accelerate the movement, particularly alongside its peers in the BRICS (Brazil, Russia, India, China South Africa) nations, who account for 26% of the global economy. Increasingly, more countries such as Saudi Arabia, Iran, and Indonesia are also looking to join the bloc.
4. Cryptocurrencies
Another factor catalysing de-dollarisation is the emergence of cryptocurrencies, which many feel may potentially be an alternative to fiat. Some, like Bitcoin, are fully decentralised and insulated from interference by institutions like central banks, making them an attractive alternative. Already, countries like Venezuela have fully embraced Bitcoin in their bid to de-dollarise, and Honduras has set up a special economic zone where Bitcoin is accepted as legal tender.
Potential impacts of de-dollarisation on the global economy
No one can say for certain what can happen in a world where the USD is not the de facto currency because there are many variables to consider, such as the extent of de-dollarisation, and which currencies emerge to take its place, if any.
In the hypothethical event that the US dollar is ever dethroned, there is little doubt that global financial markets will be thrust into turmoil, with the scenarios below being potential outcomes.
Reshape hierarchy between currencies
De-dollarisation could fundamentally alter the balance of power among different currencies in the global financial system. Should nations ever actively distance themselves from the USD, currencies from some of the largest economies or blocs could gain greater prominence in international transactions, particularly those of major economies such as the euro, yen, and yuan.
- Euro: The euro could become the primary currency for trade within the European Union and could also gain greater acceptance for international transactions.
- Yen: The yen may benefit from Japan's position as a major creditor nation and its role as a hub for financial markets in Asia.
- Yuan: The yuan could become a more widely used currency for international transactions, particularly in Asia, as China seeks to strengthen its economic and financial influence.
Currently, the USD, the euro, the yen, the pound sterling, and the Swiss franc are the primary reserve currencies, with the USD making up nearly 60% of total global foreign exchange reserves. If the de-dollarisation movement ever gains pace, other currencies may take its spot. For instance, China's yuan has become increasingly popular in international payments and could emerge as a viable substitute.
The transition to alternative reserve currencies could lead to changes in the structure of the international monetary system. Multilateral efforts might arise to create mechanisms for stabilising and coordinating different reserve currencies. These efforts could involve the International Monetary Fund (IMF) and other international organisations coming together to ensure the stability and liquidity of the global financial system in the absence of a single dominant currency.
🔑Read more: Foreign Exchange (Forex) Rates: How Do They Actually Work?
Introduce market volatility and instability
Exchange rate fluctuations between the USD and other currencies could trigger significant movements in currency markets, impacting international trade competitiveness, cross-border investments, and even triggering speculative trading. Such exchange rate volatility can create uncertainty for businesses and investors, affecting their risk management strategies and decision-making processes.
Capital flows would almost certainly be affected as investors reassess their portfolios in response to changing currency dynamics.
Financial institutions and governments are likely to respond by developing new risk management frameworks. Hedging mechanisms such as currency swaps, options, and forward contracts, might become more prominent, and new financial instruments may even emerge.
Shift dynamics of cross-border trade
Almost immediately, there would be newfound complexities over the way nations approach existing trade agreements and frameworks. Without a standard underlying currency, they would have to renegotiate, redraw, or even reconsider these contracts, which could hurt employment, agricultural output, manufacturing and more on both sides of the equation.
Businesses might also have to prepare themselves for higher transaction costs because now, they would need to convert currencies more often and navigate more complex payment systems. The use of multiple currencies and settlement systems could also make international transactions more complex and less efficient.
Complications are likely to arise in the commodities market where oil, gold, grain, and others are usually quoted in USD. The shift to another currency may make trading difficult, with other consequences that range from trade imbalances to supply chain shortages and even food security concerns.
One bright spot that de-dollarisation shines on trade is that it could potentially open up new markets and opportunities for countries that have never been heavily reliant on the USD. Gaining new access to diverse currency markets could promote economic growth and diversification for these countries and pave the way for stronger financial inclusion worldwide.
Accelerate adoption of cryptocurrencies
In a world where the dollar is no longer king, there is a possibility that digital currencies will play an important role in international transactions. One of the primary advantages of cryptocurrencies like Bitcoin is its decentralised nature, making it less susceptible to government or central bank interference.
Bitcoin has already emerged as a potential alternative to traditional fiat currencies in international transactions. In recent years, many cryptocurrency exchanges have begun offering services to facilitate cross-border payments, allowing users to send and receive funds in various digital currencies, making it a viable option for those seeking to reduce their reliance on traditional banking systems and fiat currencies.
Moreover, cryptocurrencies may also provide a solution to the challenges posed by fluctuating exchange rates and the costs associated with currency conversion. As digital currencies become more widely accepted, they could help to streamline international transactions and reduce overhead costs for businesses.
Drive up debt that has been issued in dollars
Nations and companies that have issued dollar-denominated debt might face challenges as the value of their domestic currency may depreciate relative to the dollar, drastically increasing the cost of servicing the debt.
For emerging market economies, the risk and costs involved will be more severe as a further weakening of their currency against the USD could lead to budgetary pressures, economic instability, and potential sovereign default risks.
Investors are likely to reassess their appetite for dollar-denominated debt from countries undergoing de-dollarisation as well. Faced with higher currency risk, investors will demand higher yields as compensation, making it more expensive for these countries to access international capital markets. This could limit their ability to raise funds for development and investment projects.
Could de-dollarisation really happen?
One thing to note is that the scenarios listed above are just possibilities, which means it is unlikely to happen in the near future. While there have been efforts by countries like China and Russia to promote the use of their own currencies, the USD still accounts for the majority of cross-border payments.
The pace of de-dollarisation efforts is also uncertain, with some countries and regions moving faster than others. The success of these efforts will depend on a variety of factors, including political stability, economic growth, and technological advancements.
While there may be growing interest in diversifying currency reserves, concerns about the viability and readiness of alternative currencies persist. The complexities and uncertainties surrounding alternative currencies, combined with the intricate web of global financial relationships, indicate that a complete de-dollarisation in the near future is highly improbable.
Hedge against currency volatility with Wallex
Fluctuations in currency values are a given, and the best way to hedge your risk is to diversify your currency holdings. Wallex lets you do just that with its Multi-Currency Account, allowing you to hold 13 top global and Asian currencies including the GBP, EUR, SGD, CHF, and JPY.
The Multi-Currency Account also makes it possible for you to hold currencies for as long as you want, so you can easily manage your currencies and time your conversions to when rates are favourable.
Wallex, however, does more than help you hedge against currency volatility. Our platform takes away the complexities and costs that businesses face when moving money across borders. Payments are faster and easier with Local transfers, collections can be made in 36 different currencies, and you can enjoy round-the-clock support from a dedicated Account Manager should you encounter any issue.
Learn more about Wallex here or get in touch today!
The Ultimate Checklist: What Does a Top-Notch B2B Payment Solutions Provider Look Like?
Historically, international payments were always time-consuming and arduous.
Only about two decades ago, making a cross-border payment would require you to go to your local bank and fill up a transfer form manually. In addition, these global payments always came with a hefty fee, be it a markup on the FX conversion rates or the bank’s fees.
This, obviously, did not last because time is money, and this gruelling process was a gargantuan obstacle for global expansion.
In the last two decades, the world has seen the rapid evolution of international payment systems and services. So much so, we’re at a point where trillions of dollars in hundreds of different currencies can flow across borders in real time. This is thanks to both the banks’ innovative approaches, the establishment of global networks,and the rise of specialist payment providers, like Wallex, that offer an alternative.
FinTech companies not only reduce the barriers to entry for international payments, they’re also fully compliant with local regulations, transparent, may offer API solutions, and possibly an even better customer experience.
The importance of a long-term global payment service provider
As innovation comes and goes, so do payment service providers (PSPs). Case in point, in 2023, American Express announced the termination of its foreign exchange services for business clients. Consequently, their clients have no choice but to seek an alternative PSP before the company officially halts its services.
Depending on the timeline given, it has the potential to impact day-to-day operations and lead to even greater risks.
But on the flip side, if the selection of a PSP is done right, it permits your business to scale up more efficiently, without incurring the hefty cost of constantly switching between PSPs.
With that said, whether you’re seeking an alternative to AMEX or on the hunt for a new global payment service provider (PSP), here are five items you should consider.
Reliability
AKA, anti-fragile, pivots on one notion — avoiding causes of operational delays.
In the payments industry, there are certain periods where there is a heightened demand for international transfers or foreign currency exchange. These may be predictable periods such as local holiday seasons or unpredictable periods such as global trade conflicts.
A reliable PSP platform must have the capability of withstanding high volumes without any service disruption. This not only avoids any potential delay of the payment, it also prevents slippage if foreign currency exchange is involved.
Above that, the reliability of the PSP also involves the longevity of the platform. In the event of an exit (like AMEX), customers have no choice but to re-set up their cross-border transaction operation with another global payment solution provider. This, of course, will eat up time and effort, at the very least. And at worst, it may cause further disruption and bottlenecks in international operations or cash flow issues.
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Read more: Top 4 Ways To Make Overseas Payments For Businesses 2023
Security
The security of a platform comes in two facets — reconciliation and compliance.
Reconciliation is the process in which the two sets of records (the originator’s and the beneficiary’s records) are checked against each other to ensure consistency. In practice, this process typically involves checking invoices against bank statements and making sure that the payment is made correctly. And if there are any inconsistencies, a good PSP makes it easy for its users to reconcile the transactions.
Compliance helps businesses avoid regulatory scrutiny. This is especially important in international transactions, which may require compliance with two or more different jurisdictions. If a PSP is not compliant with local regulations, there is always the risk that the funds will get held up before reaching their intended destination.
Additionally, both reconciliation and compliance provide clients with another level of protection against fraud by preventing engagement with non-compliant businesses or sanctioned countries.
Platform versatility
Your business isn’t static; your PSP shouldn’t either.
In a world where the slightest competitive advantage can set you apart from competitors, you should ensure your PSP is also providing access to the most powerful technology in the market.
Not just that, as your business grows, your payment needs will also grow. For instance, you may not require advanced features such as bulk payments, payment automation, or the maker-checker process now, but this may change as your business expands into different countries.
Having a platform that has a suite of products lets you scale up your processes without having to migrate to a new PSP.
User-friendliness
Integrating a new software/ecosystem is always painful. That’s because it requires internal teams to rejig existing processes and go through a steep learning curve to adapt quickly.
A great PSP pays attention to this through simple user interfaces that allow users to navigate through and utilise the platform, even without much prior training. It includes everything from the onboarding journey, right through confirming a payment.
This is pivotal for companies who are migrating from one platform to another, yet still want to avoid any operational hindrances.
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Read more: Is Wallex A Good Alternative To DBS For International Payments?
Customer support
In unprecedented situations, customer support is the handyman that will help you resolve issues promptly. Not resolving them in the quickest manner possible may lead to unprecedented costs. In less eventful periods, on the other hand, can help clients or users find ways to optimise their cross-border payments.
Customer support is also crucial in resolving disputes and chargebacks in cases such as fraudulent transactions, billing discrepancies, or even delivery disputes. Above all, having great customer support (at an arm’s length) showcases the PSP’s commitment to customer satisfaction.
Final thoughts
As the world becomes more and more interconnected, international business and trade is the natural progression. But, whether this is an opportunity, or a challenge depends heavily on the PSP.
Choosing the right global payment service provider is not just about cost, but also reliability, security, platform versatility, user-friendliness, and customer support. These are the differences between a good and a great PSP.
If you’re looking for an alternative to your current payment service provider, check out Wallex. Our 98% positive reviews are a testament that we are committed to serving our clients with the highest standards, rain or shine. Supporting your business is our business.
Sirclo sebagai E-commerce Enabler terbesar di Indonesia, menghemat waktu dan biayanya menggunakan Wallex
"Kami dapat menghemat waktu setiap minggunya dengan platform online Wallex"
Jane Aprillia Gosal, Manajer Keuangan, SIRCLO
Latar Belakang
SIRCLO sebuah perusahaan teknologi dan e-commerce enabler di Indonesia, mendukung bisnis untuk menjual secara online dengan menawarkan 2 kategori solusi utama; solusi dan Perusahaan. Pada kategori wirausaha, SIRCLO menawarkan platform pengelolaan toko online bagi UKM untuk berjualan di 3 platform yang berbeda (website, marketplace, chat commerce), yaitu SIRCLO Store. Pada kategori enterprise, SIRCLO menawarkan layanan end-to-end e-commerce enabler melalui SIRCLO Commerce dan solusi untuk pengembangan teknologi omnichannel melalui ICUBE by SIRCLO.
Secara keseluruhan, SIRCLO telah membantu lebih dari 100.000 merek untuk mengembangkan bisnis online mereka. Solusi SIRCLO telah dipercaya oleh merek lokal Indonesia seperti ATS The Label, Benscrub, Evete Naturals, Namaste Organic, This Is April dan Heytimmy Kidswear, serta dipercaya oleh merek-merek Internsional seperti Unilever, Reckitt Benckiser, KAO, L'Oréal, dan Levi's .
SIRCLO mengintegrasikan perangkat lunak atau vendor dari beberapa negara di luar Indonesia untuk mengaktifkan beberapa layanan mereka dan perlu untuk melakukan transaksi ke berbagai negara, termasuk Singapura, Amerika Serikat, Cina, dll dari kantor pusat mereka di Jakarta, Indonesia.
Sejak salah satu grup perusahaannya beralih ke Wallex, pengalaman positif telah mendorong banyak entitas perusahaan menggunakan Wallex untuk melakukan pembayaran internasional dari Indonesia.
Tantangan
1. Batas transaksi perbankan online
Meskipun sebagian besar bank di Indonesia menawarkan layanan berbasis online, mereka hanya dapat melakukan untuk pembayaran jumlah kecil dengan batas USD 25.000. Untuk transaksi bernilai tinggi, wajib mengunjungi cabang bank. Mereka dapat melakukan beberapa transaksi bernilai rendah melalui perbankan online, tetapi ini berarti pengguna masih perlu pergi ke cabang bank untuk transaksi dalam jumlah besar.
2. Kurang Efisien
Batasan transaksi harian, ditambah dengan jam operasional bank yang terbatas, dapat menghabiskan waktu yang tidak efisien dalam melakukan pembayaran lintas negara - membutuhkan waktu hingga 3 jam untuk melakukan satu transaksi. Belum lagi, rumitnya untuk mengisi dokumen setiap kali ingin melakukan transaksi internasional.
3. Biaya transfer & nilai tukar yang tinggi
Karena bank membebankan biaya sesuai persentase (%), maka transaksi yang bernilai tinggi juga akan membebankan biaya yang besar. Mengingat kebutuhan bisnis untuk memindahkan uang dalam jumlah besar, ini berarti biaya besar yang dikeluarkan di semua pembayaran FX.
Solusi
Dengan penawaran flat-fee dari Wallex Indonesia dan tidak membebankan berdasarkan persentase dari nilai transaksi, SIRCLO mampu menghemat sejumlah besar biaya dan mencapai efisiensi yang lebih tinggi dalam pengeluaran perusahaan.
Platform online Wallex sangat mudah digunakan dan menghemat banyak waktu, tanpa harus melakukan kunjungan ke cabang bank.
"Kami juga tidak perlu mengajukan banyak dokumen, menghemat waktu dan menyelamatkan bumi dengan menghemat penggunaan kertas!"
Hasil
Sekarang, dengan menggunakan platform online Wallex dan pengalaman pembayaran yang lebih simple, tim Keuangan SIRCLO menghemat waktu setiap minggunya dan memperoleh keuntung sebagai berikut:
- Kemampuan untuk melakukan transaksi kapan saja, dari mana saja, tanpa harus pergi ke bank
- Hanya membutuhkan waktu 15 menit untuk melakukan pembayaran (sebelumnya 3 jam)
- Kebutuhan dokumen lebih simple
- Memanfaatkan biaya flat-fee dari Wallex untuk pembayaran internasional (yang sebelumnya menghitung biaya % untuk setiap transaksi)
- Tersedia harga yang kompetitif dibandingkan dengan Bank dan alternatif pembayaran lainnya.
Fokus terhadap pengembangan bisnis Anda dan percayakan urusan pembayaran dengan Wallex.
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