Last Monday the Nikkei 225 index fell by 3.7% to a 6 week low of 13,261.82. It has fallen by 15% since hitting a five-and-a-half year high last May.
Written by Chris White
The fall was partly due to a collapse in Japanese shares on foot of weak manufacturing data from China, speculation over possible US scale-backs as part of America’s overseas stimulus strategy and a slowdown in America’s bond-buying schemes.
These circumstances have all conspired to hit Japan’s two single most important export markets; America and China.
However, in response to the Japanese Central Bank has decided to double the countries money-supply and to buy up long term government bonds in an attempt to keep Japanese interest rates as low as possible, in an effort to get Japanese consumers and businesses to increase domestic spending.
One further measure includes the Bank of Japan raising its annual inflation target to 2%, which is also intended to trigger an increase in domestic consumption and business.
Speaking to BBC journalists Martin Schulz of the Fujitsu Research Institute in Tokyo said: “The fears of a slowdown in the global economy have given rise to an uncertainty about the demand for Japan’s exports, despite the weaker Yen.
At the same time, there are concerns whether the Bank of Japan’s policies will be enough to engineer a long-term sustainable recovery. That has put the brakes on the recent run seen in Japanese equities. With price increases of that level over such a short period of time, one expects some kind of reversal, which we’re having at the moment.”
Analysts predict that the measures should aid Japanese exporters in their recovery from the fall.
All these measures come as a backdrop to the 30% fall of the Yen against the US Dollar since November 2012.
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