Firm but Uneasy Market

Tokyo Stock Exchange finished its operation of this year on Wednesday. Nikkei Average of the day was ¥19,033.71, rising from the final price last year by ¥1,582.94. With great amount of money supply from Bank of Japan to the market, final Nikkei Average marked moderate growth for four consecutive years. However, Japanese economy still holds negative elements for next year, including end of inflation policy of United States Federal Reserve Board or decline of Chinese economy.

Final price on Wednesday was the highest record after 1996. Following rally of U.S. market, Nikkei Average rose up for three consecutive days. The market closed in the afternoon with the sound of bell rung by classic music conductor, Yutaka Sado.

In the first half of this year, stock market rallied with BOJ policy of monetary easing. Although the lowest price was marked in January, Nikkei Average rose with not only BOJ policy, but decision of introducing monetary easing by European Central Bank. After reaching ¥20,000 in April for the first time in these fifteen years, Nikkei Average kept on rising and marked the highest of this year, ¥20,868, in June. It exceeded the highest price in 2000, when bubble economy led by information technology appeared.

Chinese decline directly affected Japanese economy in the summer and after. Chinese gross domestic products in the third quarter went down below 7%, which was the same level in 2009 when Lehman Shock shook the world economy. After Chinese government devaluated Renminbi for three consecutive days in mid-August, Nikkei showed steep decline to ¥17,000 or below in September. Speculation on Chinese economy doubted its situation as bad as requiring for maintenance of export with manipulation.

When Chairwoman of FRB, Janet Yellen, announced the end of zero interest policy in December, Tokyo Stock Exchange was not affected so badly. Stable U.S. economy is also a stabilizer of Japanese economy. But, a great concern is the impact of FED policy on emerging economy. If money goes back from emerging countries to U.S., worsened emerging economy will affect Japanese stock market. Cheap petroleum also causes negative impact on the economy of oil exporting countries.

Shinzo Abe administration keeps on announcing that high Nikkei Average is a symbol of success of Abenomics. But, economists know the vulnerability of stock market supported by monetary policy. To persuade the world and Japanese citizens of its viability, Japanese government needs to make more efforts for further and sustainable growth.