Daily Commentary

MarketMinder’s View: On the heels of last weekend’s public spending plans, Japan’s cabinet has finalized some tax tweaks aimed at boosting business investment. Like the supplemental budget, these will need parliamentary approval, so they could be watered down or abandoned. That is one reason we suggest tempered expectations. Here is another: The proposed reforms are temporary, sunsetting after five years. Under the proposed system, companies will be able to “deduct 8% of the value of their capital investments from their corporate tax liability” (15% for companies affected by US tariffs) or “depreciate the entire cost of their capital investments in the first fiscal year. This is intended to facilitate consideration of subsequent investments for businesses, particularly those in the growth stage that are facing immediate cash flow challenges.” Don’t get us wrong, measures like this can encourage investment. But when they are only temporary, they tend to pull forward investments that would have happened anyway rather than create new ones out of whole cloth. The article notes the late Prime Minister Shinzo Abe adopted something similar in 2014, with a three-year shelf life, and it credits this for higher business investment. But the boost was short-lived, with investment growth slowing afterward and contracting in 2019, before COVID lockdowns. It is hard to envision any temporary changes creating a virtuous cycle. Nice as the short-term benefits may be, an ever-changing tax code increases uncertainty. So we don’t think this is likely to be some massive positive for Japanese stocks. Other tailwinds probably matter more.

MarketMinder’s View: Here is an interesting look at how America’s C-suites are talking about tariffs, based on over 5,000 earnings calls from 2025’s start through earlier this month. In doing so, the article lists several publicly traded companies, so please note MarketMinder doesn’t provide individual security recommendations. At large, it seems most business leaders think the worst tariff-related pains are behind them. As the article details, the share of companies discussing tariffs negatively began rising after President Trump’s inauguration in February, unsurprisingly peaking on his April 2 Liberation Day tariff announcement. Since then, tariff mentions floated into the “More Positive” section, especially as the White House brokered trade deals throughout Q3. Newer tariffs in late September and early October stoked negativity anew, but as we write, views overall have improved. As the article aptly points out, this makes sense given tariffs’ softer-than-expected effects on the US economy thus far. Many companies’ effective tariff rates have turned out to be much lower than those announced on Liberation Day, as demonstrated by lower-than-expected tariff revenues (per the Congressional Budget Office). Less-severe-than-anticipated levies have allowed companies to absorb much of the cost instead of passing them on to customers—an overlooked positive. Now, executives’ tones in discussing tariff risks say little about their companies’ future actions or outlooks (e.g., profits, investments, etc.). But it does show that, en masse, tariffs are much less of a concern than originally imagined—one less thing to worry about when planning the investments that can fuel future profits.

MarketMinder’s View: The titular trend? America’s economic expansion chugs along despite lackluster jobs data. “That dichotomy of an expanding economy and a softening labor market presents a conundrum for policymakers at the Federal Reserve, complicating their efforts to determine whether the economy needs cooling or boosting.” A “jobless expansion” is an alleged negative because it presumes jobs support economic growth, i.e., if the labor market doesn’t rebound, the broader economy will eventually falter. That then supposedly raises the likelihood of a Fed policy mistake (e.g., not cutting rates to “support” the economy) or even recession ahead. And while monetary policy mistakes (i.e., leaving rates too low for too long or raising them too quickly) can have economic consequences, we see a couple of points worth noting here. For one, the argument relies heavily on some Fed official quotes to suggest increased uncertainty around upcoming policy decisions. Sounds spooky, but this is nothing new. Years of Fed meeting minutes show plenty of debate and disagreement among officials—we don’t see a novel threat here. Moreover, weak hiring doesn’t portend future economic weakness or contraction. We saw this through much of 2010 – 2012 and in the late 1990s (per FactSet). Yet no recession followed the former. The reason: Jobs are always and everywhere a lagging economic indicator, which is why you generally get handwringing about a “jobless recovery” early in a new cycle. Labor represents a big investment of time and money, and businesses tend not to add or reduce headcount unless absolutely necessary—which means action tends to follow a long stretch of economic weakness or contraction. To us, this piece is heavy on fearful speculation, not anything useful for investors.