Financial markets have reacted little to Prime Minister Yoshihiko Noda’s mooted new economic stimulus package, with analysts pointing to the mountain of unfinished business facing his government before further spending measures can be implemented.
The government should focus on other key issues, such as early enactment of a bill to issue deficit-covering bonds for the fiscal 2012 budget, according to Koya Miyamae, an economist at SMBC Nikko Securities Inc.
On the Tokyo Stock Exchange, the benchmark Nikkei 225 index rose some 100 points Wednesday but the gains were mostly attributed to overnight rises in U.S. and European stocks rather than the impact of Noda’s envisioned economic package, traders said.
“It is difficult for the market to react in any way before the specifics of the stimulus package are laid out,” said Daisuke Karakama, market economist at Mizuho Corporate Bank.
On Wednesday, Noda instructed his Cabinet to tackle urgent policy items by month’s end and to swiftly implement them. An overall stimulus package, including other items of expenditure, is expected to be compiled by the end of November.
The foreign-exchange and Japanese government bond markets were also little affected by the news, with investors already skeptical about the possible benefits of further stimulus.
The government has set aside as much as ¥19 trillion for projects to rebuild areas shattered by the March 2011 earthquake and tsunami, but this has not produced “tangible effects,” Yasuhide Yajima, chief economist at NLI Research Institute, noted.
The market’s focus is mainly on the possible dissolution of the Lower House for a snap election, and the passage of the deficit-covering bond legislation.
In particular, investors are concerned that government bond yields could start to wildly fluctuate if the government fails to enact the bond bill.