After the financial market opened on Wednesday in Japan, the stocks kicked off the year with gains, supporting the positive outlook in the economy while Japan Prime Minister opened the year with huge optimism on Abenomics as he makes the economy his “highest priority” in 2017. Can the soaring stocks keep the momentum amid the doubts in the capability of the government and the central bank to lift the economy?
Stocks on the Rise
Japan stocks traded higher headed by the 2.51 percent increase of the Nikkei 225. There were approximately 2800 stocks soaring on the Tokyo Stock Exchange with only more than 300 stocks in the negative track.
Rising stocks were mostly from automobile, glass and paper &pulp sectors. After the opening bell, JTEKT, the combination of Koyo Seiko Co., and Toyoda Machine Works, sizzled after jumping 5.56 percent to 1974.0-marking its 52-week highs. Nippon Yusen K.K. added 6.93 percent while Isetan Mitsukoshi Holdings Ltd gained 5.71 percent.
Meanwhile, Toshiba Corporation extended its bearish tone after losing 2.12 percent. Kao Corporation a cosmetics and chemical company, slipped 0.74 percent while Alps Electric declined 0.81 percent, making them the worst performers in the session.
Nikkei Volatility went down 1.61 percent to 20.83 compared to its last stance at 21.17 with a 4.23 percent advantage.
Japanese stocks ended 2016 in the defensive track as the strength of the US dollar drove the Nikkei 225 below the ground. Shares in mining, power, and gas &water sectors were among the worst performers. Adding to this, the outline of outright purchases of Japanese government securities released by the Bank of Japan failed to provide a positive notion among the investors.
Last December 30, the BOJ announced that there were approximately 8 to 12 trillion yen to be purchased per month in principle starting today. The next announcement will happen by the end of the month.
Abenomics in 2017
Prime Minister Shinzo Abe hit the headline as he reiterated the implementation of its long term economic plan to support the recovery of the economy. During the press conference, Abe strongly stated that they would put the highest priority on the economy, keeping their commitments on the three arrows of monetary policy, fiscal policy and growth strategy to beat deflation.
Abenomics has been imposed for five years already and its effectiveness throughout this year could be summarized in just one word –okay. Currently, both the government and the central bank of Japan claim that there’s a recovery occurring on the way.
True enough, Japan’s consumer spending rallied 296860.10 JPY billion in the third quarter of 2016 from 295904.80 JPY Billion in the second quarter. In the recent BOJ’s quarterly tankan survey of business sentiments, it showed the initial improvement in the confidence index of major manufacturing firms in 1 and a half years.
Loopholes are expected as the economic confidence looms. At the second half of 2016, Japan posted the 3.0 percent drop of the jobless rate, the lowest rate since 1995. However, the seasonally adjusted jobless rate in Japan rallied 3.1 percent in November; approximately there were 20.05 million unemployed Japanese. The unemployment rate was even 3.3 percent higher a year earlier.
Elsewhere, the Japanese currency snatched a temporary gain against the greenback. As of 12:55 UTC, USD/JPY lost 0.11 percent to 117.60.
The improvement of the entire economy leaves an impression on the stocks. And to make it short, Abenomics can provide a relevant support in the Nikkei 225, if and only if, the structural reforms are properly carried out. If not, should the Japanese government consider a different economic policy?