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Japanese Stock Market Could Benefit from Saturday’s Abe Announcement

The Japanese stock market might like Saturday’s announcement from Japanese Prime Minister Shinzo Abe.

There’s no doubt that Japanese Prime Minister Shinzo Abe isn’t high on the list of Japanese citizens right now. After the japanese stock market rose parabolically since the beginning of the year, it has sold off about 20 percent.

This has left Japan believing that even with a bond-buying program the size of Japan’s, there’s little Abe can do to stem the state of deflation that has plagued the country for years.

When Abe announced the third part of his economy recovery plan earlier in the week, markets responded by selling off more than 3 percent.

On Saturday, Abe said that the government was considering tax cuts that would encourage companies to spend more. The decision, according to the Prime Minister will come sometime in the fall once parliament reconvenes after election season.

In addition, the government will work on legislation that will encourage more corporate research and investment.

“We’d like to decide on bold tax cuts for capital expenditure in autumn,” Abe said.

The Nikkei, the benchmark of the Japanese stock market, is down sharply but when asked, Abe has said that he won’t comment on the day to day movements of the market.

Reaction to the pullback is mixed. Many analysts believe that it’s a technical pullback to more sustainable and fairly valued levels while others say that it’s an increasing fear that Abe’s plan will cost a lot of money but do very little to strengthen the Japanese economy.

In what is the temporary new normal, all eyes will be on the Nikkei Monday for reaction to Abe’s latest grand plan revelations.

 

 

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