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Nikkei Down after Prime Minister Abe Disappoints

The Nikkei ended the day lower by 3.8 percent after Prime Minister Shinzo Abe disappointed investors in his much anticipated speech on Wednesday.

The Nikkei ended down 518 points closing at 13014.87. The 3.8 percent drop represents a fresh two month low for the Japanese index.

Investors anxiously awaited Abe’s speech where he revealed the reported “third arrow” in his plan to pull Japan from a decades-long period of deflation. In the speech he pledged to raise wages by 3 percent annually over the next decade and set up special economic zones to attract foreign investment.

In April, the Bank of Japan set a target of achieving two percent inflation in less than two years. In order to achieve that goal, wages will have to rise.

The speech wasn’t well-received by the markets. Investors wanted to hear a bolder plan that included reform for the labor market. The sentiment among investors and analysts was that prime ministers for the past 20 years had made similar promises only to end up not delivering.

“Either you make some progress in the next 6-12 months, or people realize it is just another bunch of hollow promises,” said Richard Jerram, chief economist at the Bank of Singapore.

As stocks plunged, the Japanese government tried to re-assure investors. A top government spokesperson said that he didn’t believe that Abe’s remarks were disappointing but the market wasn’t convinced. At the end of the day, the Nikkei plunged causing other markets to fall as well. The Australian market was down 1.34 percent, the Hang Seng, down 0.97 percent, and the KOSPI fell 1.52 percent.

In the United States, futures were down fractionally on the news.

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