The Bruising Truth About Shipping

Maybe some would call this a sign of a bottom. But for those who believe the bond market isn't a bubble, we say may the force be with you.

One sign the global economy isn't what the cheerleaders want it to be is plain, old vanilla shipping. A recent WSJ article had this to say: Until a year ago, the shipping industry was ordering ships in droves. This year, orders of new vessels have fallen to a record low and companies can't get rid of ships fast enough.

About 1,000 that have the combined capacity to haul 52 million tons of metric cargo--about the weight of 142 Empire State buildings--will be dragged onto beaches, cut into pieces and sold for scrap metal this year. That is second only to the record amount of capacity of 61 million  so-called dead weight tons that were scrapped and real cycled in 2012.

The global economic slowdown is putting shipping through its most bruising period since the 2008 financial crisis....As the companies, mostly based in Europe and Asia, fight for bigger shares of the global market, freight rates have dropped so low they barely cover fuel costs.

Much like the energy industry this is capacity going offline. The average for recycling ships is 30 years, the Journal notes. But in 2016 it's been cut to 15 years, a move, as noted, to cut excess capacity. But cutting over capacity doesn't solve the problem. There is something out their called China, not to mention the almost non-existent signs of any growth in Europe.

China's been a big importer of commodities, just ask those exporting commodity nations that are feeling China's slowdown. Or take a look at this. zerohedge.com/news/2016-08-17/japanese-imports-exports-crash-worst-rate-2009

For the 19th month in a row, Japanese Imports plunged - dropping 24.7% YoY (worse than expected), the biggest drop since Oct 2009. Exports were just as dismal, also missing expectations, plunging 14.1% YoY - worst since Oct 2009. The biggest driver of the collapse of Japanese trade was a 44% crash in the Chinese trade balance. 

 

Overnight

It's about the dollar. What it's not about is the Fed. The Fed is becoming more insignificant as time goes on in a world that's being twisted and jerked by crazy central bank policies and bureaucratic incompetence.

 The good thing about both is they create opportunities to make money, lots of money. They create imbalances. As Reuters noted: Asian stocks rose and the greenback languished near two-month lows on Thursday after minutes of the U.S. Federal Reserve's latest meeting showed policymakers were in no rush to raise interest rates.


MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.4 percent as investors added to positions after a 14 percent rise over the last two months.
Technology stocks, especially Tencent (0700.HK) and Lenovo Group (0992.HK) led the index higher

Hong Kong shares .HSI was the top gainer in Asia with a 1 percent rise, while a stronger yen, thanks to the Fed's cautious outlook, pulled Japan's Nikkei .N225 back 0.5 percent. The July meeting minutes released on Wednesday showed that Fed policymakers were generally upbeat about the U.S. economic outlook and labor market. But they also said they wanted to "leave their policy options open" as any slowdown in hiring would argue against near-term monetary tightening.
That's what's known as fence sitting or hedging your bet, something this Fed is now famous for, the lack of will to make a decision. Even the good job numbers are phony and they know it. So what's that say about the bad job numbers. Forget the Fed minutes. Watch the dollar.
The regional story was about stronger currencies with the yen rising and the Aussie dollar up, pushing stock markets down. The Wall Street Journal reported: Shares in Asia were mixed Thursday, with stronger regional currencies putting pressure on some stocks, while China’s plans to further open its equities market provided a delayed boost. The Nikkei Stock Average was hit by a stronger yen, falling 0.2% in morning trade. The yen broke below the 100 level versus the U.S. dollar. Elsewhere, Australia’s S&P/ASX 200 edged down 0.4% as its local currency strengthened following strong jobs data.Hong Kong’s Hang Seng Index was up 1.5%, Seoul’s Kospi added 0.3%, while the Shanghai Composite Index gained 0.2%. 

The Edge Gets Nearer

Everyone has a story or two from their growing up years.

There was a local character in our town who went around the neighborhood telling everyone for months he was leaving until, guess what?, just to save face one day he had to leave. That's what the Federal Reserve has been doing for some time now, telling everyone and anyone who will listen they'd like to raise interest rates.

It's really a backdoor way of asking if it's okay to do so. It's a CYA move bureaucrats are noted for. Given the falling dollar, since late January it's retraced quite a bit, investors are putting it all together and seem to be betting it won't happen this year. The dollar's recent decline, down 5% since December, to its lowest level since June is just one more piece of evidence these central bankers know not what their are doing.

Jawboning has its place, works sometime, but sooner or later it too gets exposed for what it is. Some would label it bluffing, others flat out indecision or incompetence. The real truth is economic global growth  remains quite soft. And all the phony reverenced for econometric models and dot-plot nonsense can't change it. Economists are noted for despising anecdotal  evidence. And why wouldn't they be, since it would eliminate the need for having them.

This Fed loves to hide behind terms like balanced, muted, anything that allows them to hedge or obfuscate their ignorance of what's going on. Messes are difficult to clean up, the most difficult are those you created. The recent surprising strength of the yen in the face of negative interest rates and what can only be called a hog wild monetary policy for years now baffles these textbook gurus. The same holds true for the EU. Australia recently cut its rates and their currency strengthened.

So expect to hear more about "new normals," a term another one of the blowhard, egocentric economists, Mohamed El-Erian, supposedly coined per his latest tome. The only thing new here is central banker incompetence is finally trickling down to the  masses.  Applause to the Internet. The only thing normal is these bureaucrats, left unshackled, are leading us to the same old place they always do, the edge of the monetary cliff without benefit of clergy or recourse.

Overnight

What happens in the U.S. doesn't always stay there. Shares in Asia were up overnight but not with a lot of conviction as comments by New York Fed President William Dudley and Atlanta Fed chief Dennis Lockhart pushed American shares down after both said in public statements that the U.S. central bank could raise the nation's short-term interest rates at its September policy meeting.

The Nikkei Stock Average meanwhile gained 0.6 on the back of a weaker yen, and Australia’s S&P/ASX 200 fell 0.1%. Korea’s Kospi traded 0.7% lower. The dollar edged up 0.2 percent to 100.485 yen during Asian trade after falling to 99.550 overnight, its lowest since June 24. 

The WSJ reported: China got a tepid response from investors on its plans to further open up its equity markets, contributing to Wednesday’s mixed performance in shares across Asia.

At the midday break, Hong Kong’s Hang Seng Index rose just 0.2%, with the Shanghai Composite declining by 0.2%.

Both the Shenzhen Composite Index and the ChiNext index, a listing board focused on fast-growing startups, were up 0.3%.

Late Tuesday, China gave the green light to a stock-trading link between Hong Kong and the tech-heavy Shenzhen exchanges, while scrapping important limits on how much foreigners can invest in the country’s stocks in an effort to entice global investors. However, daily trading flows into both Shenzhen and Shanghai, China’s other main market, will remain capped at 13 billion yuan ($1.96 billion) a day, and many Shenzhen-listed companies still won’t be easily accessible.

Market analysts were skeptical over how attractive this trading link would be to foreign investors, who can already invest in China’s domestic markets through the Qualified Foreign Institutional Investors scheme.

The consensus seem to be investors are waiting to see what central banks are going to do.

It's Bloomberg, Jake!

It's Bloomberg, Jake. What do you expect?

As The Daily Bell, a libertarian site, astutely and correctly points out, the fiat money ship has sprung a huge leak. A spreading lack of confidence in this confetti-drenched world brings out the scaremongers to pillory gold. The green door has been jarred wide open. Central bankers are to be trusted about as far as one can throw them.

Gold Losing Appeal for Investors Retreating From Rally … ‘People don’t believe in the gold rally,’ Holmes says. Investors are growing more skeptical of gold’s lasting luster. Hedge funds and other speculators cut their wagers on a bullion rally for the fourth time in five weeks. As traders tire, the metal’s 30-day historical volatility has dropped to the lowest since November. Open interest is also on the decline. – Bloomberg

Here comes Bloomberg telling us gold (and silver) are moving down.

That’s the implication anyway. Bloomberg rarely has something good to say about precious metals. The news service represents and endorses a technocratic version of the world.

Bloomberg’s vision is one of a world run by vast corporate interests and controlled by an elite group of bankers. These individuals manipulate money and commerce as they wish. Gold and silver only interfere with their control. thedailybell.com/news-analysis/bloomberg-article-bashing-gold-based-on-phony-jobs-report-2
  
Mark Twain once noted: there are lies, damn lies and then there is statistics. Pointing to a story by former Congressman Ron Paul, a libertarian, recently wrote about the phony recent job numbers, here's an excerpt:  A bombshell jobs report [has just been released], with headlines exclaiming that the US economy added over 250,000 jobs in July, far in excess of any forecasts.

The reality was far more grim. Those “jobs” weren’t actually created by businesses – they were created by the statisticians who compiled the numbers, through the process of “seasonal adjustment.”That’s a bit of statistical magic that the government likes to pull out of its hat when the real data isn’t very flattering.

It’s done with GDP, it’s done with job numbers, and similar manipulation is done with government inflation figures to keep them lower than actual price increases.

Those magically revised statistics Paul refers to get revised more often than a noted congresswoman's face. If they were a cosmetic product she's be fronting for it. We differ with the Bell on one point: It isn't disconcerting that Bloomberg doesn’t mention this in the article. "It’s an important point and the reader should be informed that the numbers Bloomberg is quoting are government extrapolations," they write.

It's not disconcerting. It's expected. Know who you're dealing with is the first rule. 

There's an old saying: Don't judge, assess. It's one MSM has long intentionally forgotten.

Overnight

The Nikkei 225 was off 0.2% in mid morning trading Tuesday on thin volume as it couldn't seem to find a real direct slipping further down after some see-sawing 1.1% in the afternoon on weaker oil prices and a stronger yen.

The Hang Seng Index hung around flat, falling 0.1%, the Australian ASX 200 fell 0.2% as weaker oil prices hit the commodity sector. The Kospi was up 0.1%. The WSJ reported: Late on Monday, the S&P 500, Dow Jones Average and the NasdaqComposite all reached record highs—a feat they accomplished last Thursday for the first time since 1999—on the back of hopes for production cuts in the oversupplied oil market. Brent crude oil eased back from a one-month high in Asian trade, though, and was last down to $48.04 a barrel.

The Shanghai market erased earlier gains as investors took profits in financial blue-chips. The benchmark Shanghai Composite Index edged down 0.5% to 3108.9, after trading up as high as 0.5% after the opening. Banking, car manufacturing and insurance stocks retreated the most as investors took profits in blue-chips.

The FTSE Bursa Malaysia Index climbed Tuesday morning alongside positive Asian markets lifted by expectations of more monetary easing around the globe. The Malaysia 30-stocks benchmark index increased 0.5% to 1,699.1 points in early trade, and was up 0.4% year-to-date.

In the commodity sector, copper futures edged higher and nickel fell 0.6%, while gold rose 0.5% to $1,346 a troy ounce.

The Nikkei dropped 0.2 percent to 16,837.98 in midmorning trade.

Overnight

Japan's lack growth was the story overnight pushing Asian shares down slightly Monday as the world's third largest economy continues to lag based on last quarter numbers.

The Nikkei 225 fell 0.3%, Topic index dropped 0.22%, the Korean market was closed for a holiday, the Australian ASX 200 remained flat. One report noted. Before market open on Monday, data from the Japanese cabinet office showed the country's gross domestic product (GDP) was unchanged in the April-June quarter from the January-March quarter, with exports weighing. The economy, however, grew 0.2 percent on an annualized basis.

The subdued numbers will likely revive doubts over Japanese Prime Minister Shinzo Abe's efforts . In July, Abe had announced a fiscal package worth 28 trillion yen in a bid to lift Japan's moribund economy. But analysts believe the package will likely have limited impact in boosting future GDP growth.

Singapore's DBS Bank said in a Friday note, "Although the Japanese government has unveiled a fiscal stimulus package this month to invigorate growth, the actual effects could be very limited, 

CNBC reported: Last week, the government announced a stimulus package worth $278 billion in hopes of increasing GDP growth by 1.3 percent, Reuters said.

But some banks were skeptical on whether the package would be effective.

"Although the Japanese government has unveiled a fiscal stimulus package this month to invigorate growth, the actual effects could be very limited, given that fresh spending in the package is of similar size as in the previous years," DBS said in a recent note.

Monday's data reinforced hopes for more monetary stimulus. The combination of weak growth, a strong yen and moderating underlying inflation increases the pressure on the Bank of Japan (BOJ) to ease further, according to Capital Economics.

The Great Divide

President of Germany
 
There is a saying only a fool never changes his mind. So one assumes one can't be too hard on those who finally experience some sort of epiphany. Better late than too late.

In the weekend edition of the Wall Street Journal, cited below, Peggy Noonan wrties: This is about distance, and detachment, and a kind of historic decoupling between the top and the bottom in the West that did not, in more moderate recent times, exist. 

What she and her fellow lovers of the Grand Old Party failed to see is this is part of Trump traction,  a topic we and many, many others have been writing about for some time, the great divide and the utter elitist contempt of people and for their so-called rights. The subject has never been Trump. It's been the divide.Yet she and her friends at the Journal editorial staff, mostly a group of literary eunuchs, did and have been doing everything they can to derail the Trump train since it first started.

As nearly everyone who cares to know knows, Europe has its own set of problems quite similar to the divide this upcoming election features. If  you think not, there's a new word in Webster's, Brexit. So what just happened in Germany is germane with a capital G. 

You say you want a revolution?

Germany's elite is going to get a well-deserved one soon.

“The elites are not the problem, the people are the problem.”
- German President Joachim Gauck

That may be the dumbest thing anyone has said since Marie Antoinette, and even she wasn't dumb enough to actually say it! 

This is a quote from a Germain outlet and the story posted here:
zerohedge.com/news/2016-08-13/german-president-booed-attacked-after-claiming-people-are-problem-not-elites.  .You can watch the video for yourself and decide.

Official German State TV and State Radio reported that "a handful of right wing extremists" have attacked the president and disturbed the otherwise peaceful and welcoming reception of the President. This is simply not the case, as seen in the video...
The people repeatedly shouted "Traitor!", "Get out!", "We don't want STASI Pigs" and "We are the people!".
One man, carrying his young son on his shoulders, appears to have spit on him whilst exclaiming insults. Other citizens were heard saying "You killed our children" and "What have you done to us?". They were blocked by police in riot gear, to whom they said "You are protecting warmongers, shame on you!"
The situation escalated and the riot police was forced to use pepper spray.

Heiko Maas, the German Justice Minister, called the attackers "cowards who insult the president because of their personal frustration". He himself was booed off the stage as a traitor by hundreds of Germans at the annual Labor Day celebration on the 1st of May. He said that they will be persecuted immediately, as "it cannot be allowed that such a tiny minority has influence on the political climate in Germany".
Writing in The Wall Street Journal, Peggy Noonan explained perfectly...
The larger point is that this is something we are seeing all over, the top detaching itself from the bottom, feeling little loyalty to it or affiliation with it. 

If these disgruntled were such a tiny minority it would hardly be taking on a global magnitude. Look around, something it's far too painful for the entrenched to do, so they must resort to obfuscation and epithets. In the U.S. the big hypocrisy is that neither one of these parties care a big damn about the huge chasm between the top and the bottom.

Here is a letter to the editor of the WSJ about another group of bureaucratic elites who are either out of touch or sadists. Note the term "usually rural." It's is important here because Ms Noonan ends her piece with another rural element in this story, wsj.com/articles/how-global-elites-forsake-their-countrymen.

The Fed has maintained U.S. dollar strength in relation to many foreign currencies over an extended period. This is displayed in 25% to 30% devaluations in Canadian and Australian dollars, Chilean and Mexican pesos, and the South African rand, among others, in relation to the U.S. dollar. The negative results are amply demonstrated in the current status of the U.S. mining and metals industry. Global metals are typically sold in U.S. dollars. While all commodity producers have been impacted by slowing demand, the mining sectors in Canada, Australia, Chile, South Africa, etc., have retained relative health due to appreciation of U.S. dollar prices in local currency terms.

On the flip side, the U.S. mining and metals industry has seen real decreases in the value of its products resulting in mine and plant closures and bankruptcies at an increasing rate. This same dynamic can be extended to the oil, gas and agricultural sectors of our economy. Is it any wonder that many citizens in this country are saying, “enough is enough.” The Fed’s actions at playing the global financial stabilizer is costing jobs in the basic (usually rural) industries of our economy. This is the Trump vote and it is why people are angry. 
James Hesketh
Golden, Colo.

What's interesting about the German Justice Minister's comment is his objection to "such a tiny minority having influence on the political climate." Think that one through all the while comparing it with what exists today and Ms Noonan's opening comment.

Ms Noonan should have become a hedge fund manager. She's excellent at hedging words, "a kind of historic decoupling between the top and the bottom...." Jobs in rural America are notoriously low paying, few in number and difficult to find. When you stack more competitors for those jobs in rural areas just so they won't sully up your tonier suburbs tens of miles away it's hardly an act of egalitarian altruism.
 

Spend It Your Way

In case you haven't been paying attention there's a big split going on globally between the elites, the so-called experts, and the rest of us. Brexit is just one branch of that growing tree that's getting bigger by the day. There are plenty more examples. The Trump-Clinton tussle is another, though many will try to deny it.

The meme is a simple one, the rabble should just trust the experts. There are some real problems with that: For one, there are no real experts. Politicians, bureaucrats and economists are all examples of the popular classic case. An expert can be be someone who knows a little more than you, however infinitesimal that little is. Another issue, knows more of what? At some point useful has to enter into the picture.

Text books are written by those so-called experts. When it comes to cutting interest rates, as noted in the WSJ today, it's suppose to lower currency values. But don't tell that to central bankers in Japan and Australia, to name a couple. There are many more, Russia, Indonesia, South Korea, Taiwan and Hungary.

 Asking why is a fair question, but it's not relevant at this point. As T.S. Eliot said in The Love Song of J. Alfred Prufrock:  "Don't ask why, let us go and make a visit." The yen is nearly 16% higher after the BOJ implemented negative interest rates earlier this year. Australia cut rates last week, it's second this year, and it's currency rallied promptly to its highest level  in three months.

In our Overnight blurb this week we noted New Zealand's currency, the kiwi, suffered a similar fate after bankers there lopped off 25 basis points Thursday, cutting its rate to 2%, a move that sent the kiwi to its highest levels in a month.Conventional wisdom is not always wrong. And that's problem. It's right just enough to give it a patina of credibility.

But this push back against the so-called experts and elites is the healthiest thing we've witnessed in years. The PC pendulum has swung too far for too long. Questioning authority is a salubrious exercise highly recommended. Those who worship even at the shrine of science forget just how often science has been wrong throughout its history. In fact, it's only when we often discover it errant precepts promoted by its errant zealots that we finally label those former beliefs nostrums.

Climate change fears will turn out to be one of these cases, as will the current gluten nonsense. As for believing what we read today in MSM, it requires not a grain but slug of salt, Monsanto just canceled  a GMO deal in Argentina. You have enormous power as a consumer. Shop local. Economic boycotting is a peaceful way to express your opinion. The current Olympics are a well-worn example. These monster corporations use their huge economic clout to make political statements, supporting metal winners who represent politically acceptable sports. All else notwithstanding your achievements, need not apply.

These giant corporations are the Siamese twins of big centralized government, intrusive, monopolistic, pushy and overbearing. Use whatever legitimate power you have to express your opinion. And the most powerful one you have, until they attempt to take it away, is not the ballot box, but the power of purchase. In this weekend's edition of Barron's, the business magazine owned by the Wall Street Journal that is but a shadow of what it once was, noted: "Consumer spending is the lifeblood of the U.S. economy, which made last Friday's weak retail-sales report all the more disappointing....So despite the weak data don't give up on consumer spending just yet."

That should give you a hint as to how much power you have as a consumer. Exercise it. Don't be afraid. The coward dies many deaths, the brave person only one. Use your clout to support local vendors, small business owners; these are the people who deserve your loyalty and these are the people who create most of the jobs. Don't be afraid to name names, Coca Cola, Proctor & Gamble, JP  Morgan. These and many others have used their political and economic clout to push you around for a long time.

Push back time starts with your purse. You earned it. Don't let them tell you how you have to spend it.

What Goes Around

Most people are familiar with the what goes around comes around theme.

What they might not realize it holds true in places like Wall Street. A story headline, "A Very Bad Year for Sot k Pickers," in the weekend edition of the Wall  Street Journal proves the case. It's no secret now investors have been pulling big chunks of money out of managed mutual funds, much of it headed to ETF's that try to take the personal, human element out of the investing equation.

The legendary Bill Miller of Legg Mason fame who picked his way to a phenomenal record for years by picking stocks is leaving the firm he helped make famous after 30 years. Miller is a name that rivals other stock picking legends of the past like John Neff and Peter Lynch. And there have been many others.

Index funds have come to the fore, pushed by academics and insurance companies trying to guarantee a painless, riskless way to invest, sucking in more and more innocents. Index funds have been the weapon of choice for big time selling annuity products for years. The Journal article twists the petard a bit deeper, but does fairly point out some of the changes that make stock pickers' job more tenuous.

One of the reasons is correlation. In a shrinking environment contagion has a better chance of flourishing. Part of it's owing to what Wall Street is famous for, marketing, and a host of other reasons that include poor corporate earnings, a low or almost no yield environment and that always dirty five letter word, money. In today's topsy-turvey setting people just want to get their money back rather than go for penthouse.

As for signs this will change a Journal sidebar to the above story says it all. In Palo Alto, California, according to one source, the average home in the cheapest neighborhood is $1.3 million, pricing nearly all middle class buyers out of the market. So the local planning commission sought to address the problem only to discover one of their commissioners reigned owing to the high cost of living. She and her husband reportedly moved to Santa Cruz,California. And here another tidbit from the what goes around comes around past. At the top of the Japanese stock market frenzy, the Emperor's Palace in Tokyo was priced at a value greater than all the real estate in California.

Tokyo's Surging Stock Prices Top Record Set Before October Crash

By SUSAN CHIRA, Special to the New York Times

Published: April 8, 1988

TOKYO, Friday, April 8— Prices on the Tokyo stock market continued today to rise above the peak reached before last fall's global market collapse. No other major stock market has returned to its pre-crash levels.

Yesterday, the Nikkei average of 225 stocks closed at 26,769.22 yen, well above the previous record of 26,646.43 yen reached on Oct. 14, five days before share prices around the world collapsed. That increase was 258.05 yen, or 97-hundredths of 1 percent. In trading today the Nikkei had risen another 141.68 yen, to 26,910.90, by the close of the morning session.

The surge in prices demonstrates the underlying strength in the Tokyo Stock Exchange, the world's largest in terms of money invested. While the Tokyo market has now exceeded pre-crash levels, the New York and London markets have posted comparatively modest advances and are well below their record levels. [ In a move to bolster investor confidence in the market, the New York Stock Exchange proposed a sharp increase in the level of capital required for specialist brokers to buy or sell stocks. Page D1. ] High corporate profits, low interest rates, continuing economic growth, and Government actions to prevent any drastic fall in stock prices have driven the Tokyo market's rebound, analysts here said. Fears of Overheating.

Some Japanese officials, notably Satoshi Sumita, governor of the Bank of Japan, have expressed fears that the Tokyo market could be overheating. Mr. Sumita told reporters yesterday that share prices were rising too fast in relation to the rate of economic growth. Other analysts point out that any panic in other stock markets might spread to Tokyo, given the degree to which markets are interconnected. But most analysts here said they saw no signs of imminent danger. Indeed, they said, the stock market's recent strength rests on a firmer foundation than the surge that ended last October, prompting most to predict that the market will continue to do well. 

The market's rise reflects a recognition by the Japanese of their nation's financial and industrial power, most analysts agree. Pressed by trading partners to export less, Japanese companies endured nearly two years of falling profits caused by the rise of the yen against the dollar. But now demand from within Japan, not exports, is driving Japanese economic growth.

''There is a feeling of great confidence that Japan is now a master of its own fate economically,'' said Ron Napier, an economist for Salomon Brothers Inc. here. ''Where people used to think that they had to wait to ride the next export wave, now Japan can create its own growth.''

Japanese stock prices have been recovering steadily since the beginning of this year, and the breaking of the record had been widely anticipated. Security analysts here said that Wednesday's strong showing on Wall Street, when the Dow Jones industrial average rose 64 points, or 3.2 percent, helped create yesterday's surge in Tokyo. The Dow gained only a half-point yesterday. In Tokyo institutional investors, who have remained cautious recently, bought heavily yesterday, and trading volume soared. But analysts said there are other, more fundamental reasons for the market's strength. 

Corporate profits have rebounded sharply, by about 15 percent, since October. Japan's economy has continued to expand, with domestic demand stimulating the growth. Interest rates have remained low, making the potential for profit in the stock market seem more appealing than keeping money in bank accounts. Last week, the Government imposed a 20 percent tax on certain savings accounts that had been allowed to accumulate interest tax free. Depositors are expected to shop around for better investments, and some analysts have predicted their money would bolster the stock markets. But such activity was not credited with any of this week's advance. The market has benefited from the strong yen, which has made imports of raw materials less expensive, helping to hold down inflation despite rapid economic growth. Finally, the exchange rate between the dollar and the yen, despite some recent fluctuations, seems to be relatively stable.

''Japan is in a virtuous circle,'' said Peter Tasker, general manager of research for Kleinwort Benson International, a British securities firm. ''It's very difficult for things to go wrong now, it seems.''

Mr. Tasker pointed out that share prices had climbed gradually and steadily, in contrast to the sharp rises of last spring and fall, when prices often jumped by 700 or 800 points. Still another factor is that success breeds success. Susumu Kato, chief economist here for County Natwest, a British financial institution, said that because the Tokyo market outperformed other markets, fund managers around the world felt they could not afford to stay out of Tokyo. Since mid-January, foreigners have returned to the Tokyo market in force. 

For months before the October collapse, some analysts had speculated that any global crash might start in Tokyo. They distrusted what appeared to be excessively high price-earnings ratios, a common way to assess a stock's underlying value. But accounting rules in Japan differ from those elsewhere, and Japanese investors tend to use other measures, such as the worth of a company's land holdings, to evaluate a stock. Foreigners may also have underestimated the Government's commitment to keeping share prices high. Since the crash in October, the Ministry of Finance has repeatedly moved to reassure investors