Adjustment or Turning Point

Tokyo Stock Market became a roller coaster on Thursday. After Nikkei Average marked a rise of about ¥300 in the morning, it got down by ¥1,143 in the afternoon, making a record of decline in these thirteen years. Analysts were not sure about the reason of that strange move. Some recognized it as an emerging of negative aspect of the economic policy if Prime Minister, Shinzo Abe, others took it to be a temporary adjustment. The move at least calmed enthusiastic investors down to reality.

In the morning of Thursday, the stock price got up, while investors were acknowledging the steep rise of interest rate of long-term bonds. When the hitting seven-months low of Chinese purchasing managers index was reported before noon, foreign investors, which occupied sixty percent of total exchanges in Tokyo market, supposedly sold their holds. High-speed sell/buy system, which enabled one thousand exchanges a second, accelerated that quick shift in the market. Sudden rise of Japanese Yen in Tokyo Foreign Exchange also affected the down of stock price, different from recent tendency in which cheap yen and high stock prices were closely connected each other.

The strange move in stock exchange showed the vulnerability of Abenomics. While the stock prices had been showing all-time rise from when Abe took the seat, investors were accumulating skepticisms against Japanese economy, looking for an opportunity for selling stocks. The Bank of Japan is trying to inject ¥50 trillions in the market within a year. Everybody can imagine that kind of drastic remedy would invite distortion in market economy. Thursday was the day when that concern suddenly emerged.

Nikkei News denied the view that consecutive rally in the market was ended. It explained the tumbling down on Thursday as temporary adjustment, introducing the view of an economist who believed long-term credibility to economic policy and activities of companies, also indicating some ups and downs in next few weeks. The stock price regained power in Friday morning.

Policy makers of Abe administration showed intensive calmness about the market move. Ministers of the cabinet tried to show sobering face by saying “We don’t fluctuate between hope and despair about the move of market.” But they had been delighted to see the rally as a positive sign of Abenomics, saying “We have done that, DPJ could not do.” Media also are narrow-minded, explaining the market only from the perspective of Japanese economic policy. True reason of rising stock price in May was not because Abenomics, but positive tendency of US economy. Substantial measures for encouraging business and reducing national debt is really needed.