eee cine aoe Alea J.PMorgan [email protected] 28 March 2013 e Local issues must be monitored and understood, though, to decide how to 2013 Japan GDP growth forecasts: JPMorgan and : 5 5 3 Consensus allocate capital and risk. Just to review a few, Japanese policy makers continue to present a concerted plan to reflate their economy through 2.0 monetary, fiscal and structural measures. The strong control of the 1.8 government and its high approval rating are steadily raising the chance of 1.6 Consensus success. We stay overweight Japanese equities and grow wary of the short yen 1.4 trade, as capital inflows and rising growth expectations (chart of right) are 1.2 ultimately bullish for the currency. Watch next week’s BoJ meeting, led by 1.0 newly appointed Governor Kuroda, for new reflationary measures. 0.8 JPM e The Euro area economy remains in recession, while policy makers are mt making little effort to reverse the contraction. We monitor signs of any large 0 ° deposit flight post Cyprus over coming weeks and months to judge whether 2 . the bailout may actually be worsening conditions in the Euro. Economic Jan-12 Apr-12 Juk12- Oct-12 Jan-13 forecast momentum remains negative (chart of right). These are goodreasons gp fiaman SarcenenePanveice SaiserenPemneniss to underweight the Euro area, if not all of Europe, across asset classes, against forecasts are for regions and countries that we averaged using the the rest of the world. same 5-year rolling USD GDP weights that we use for our own global growth forecast. e The US, in contrast, is seeing better spending from both corporates and consumers than we could have expected post Fiscal Cliff and sequestration. 2013 Euro area GDP growth forecasts: JPMorgan But given the huge amount of fiscal drag, which is a fact, we want to see and Consensus another 1-2 months of data before extrapolating the good news. It did support 10 US equities in recent weeks, which continue to benefit from US corporates issuing debt to buy th