The Yomiuri Shimbun June 15, 2013
Govt, BOJ must stay calm in face of fast-changing market trends
Reflecting the turbulent moves of speculative money on world markets, erratic fluctuations in this country of both stock prices and exchange rates have continued.
Confronted with this situation, the government and the Bank of Japan must remain calm and steadily push ahead with down-to-earth economic policies.
The 225-issue Nikkei index on the Tokyo Stock Exchange fell sharply Thursday, ending the day at 12,445, down 843 points from Wednesday’s close. The yen’s appreciation, on the other hand, advanced, briefly hitting the 93 yen level against the dollar.
The Nikkei average, however, is still more than 2,000 points higher than it was when Prime Minister Shinzo Abe launched his second administration in late December.
3rd arrow fired
The recent strengthening of the yen is not so painful as to deal a heavy blow to export-oriented industries. It should be noted that a stronger yen has the favorable effect of stemming rises in import prices.
The government has mapped out the nation’s growth strategy, meaning that all three arrows of the Abe Cabinet’s Abenomics business stimulus package have been fired.
Overreacting to market trends could cause declines in confidence in the government and the central bank, and threaten market turmoil.
Abe and Bank of Japan Gov. Haruhiko Kuroda met Thursday to discuss the economic situation prior to the Group of Eight summit scheduled to open in Britain on Monday.
Kuroda was quoted as explaining to the prime minister that the current pace of Japan’s economic recovery “has gradually becoming more buoyant than before.” In response, Abe was quoted as saying the government would take its “share of responsibility by steadfastly implementing growth strategies and relevant policy measures.”
Their views can be said to represent a correct assessment of the current state of the economy.
The stock market plunge was attributed to the perception by the market that U.S. Federal Reserve Board Chairman Ben Bernanke may have hinted the Fed would wind down its ultra-easy monetary policy sooner than expected.
This led market players to move funds away from risky assets such as stocks.
Foreign investors who purchased Japanese stocks in large quantities have started to sell their shareholdings. In addition, speculative moves intended to drive down stock prices and high-speed, automated transactions are two other factors considered responsible for the market plunge.
Trying to control the global flow of money simply through Japan’s domestic policy measures is extremely difficult.
It is incorrect to call the decline in stock prices the result of “insufficiencies in growth strategies” needed to revitalize the economy.
However, the government should be partly blamed for misleading the public. When stock prices were on the rise until late May, the prime minister and ministers in charge of economic affairs repeatedly stressed that this was due to the “fruit of Abenomics.” They must engage in serious soul-searching over the new development, as the declines in stock prices could be deemed as representing a failure of the government’s economic policies.
Vigilance rather than action
Earlier this week, rumors spread that the Bank of Japan might hammer out measures to stabilize long-term interest rates. As soon as it was learned that the central bank has no such intention, the yen began to appreciate and stock prices dived.
The stock and financial markets appear to be “wooing” the central bank to come up with additional financial measures to stabilize the markets.
It is inadvisable for the bank to adopt any measures that kowtow to market pressures.
However, vigilance over market trends must be the order of the day.
(From The Yomiuri Shimbun, June 14, 2013)