Tokyo stocks have been on the rise since bottoming out on Feb. 6.
The market took a breather in early March, when investors were concerned over the so-called March financial crisis, only to resume seeking its upside with the beginning of the new financial year.
Before Feb. 6, stocks were weak, reflecting investor concerns that Japan’s financial system would be hit by a series of failures triggered by the nation’s heavily indebted major companies.
In early January, the yen began to lose ground due to “Japan-selling,” while long-term interest rates were rising on the bond market. The “triple price fall,” however, triggered a turnaround in early February.
The closely watched 225-issue Nikkei average rebounded above 10,000 and continued to rise.
The yen halted its decline at around 135 to the dollar, while the price of long-term government bonds changed course at 135 in futures trading and has increased to the 138 level.
The “triple price rise” is expected to continue.
The stock market in particular is likely to maintain its firmness as the government is set to implement bold measures to fight deflation.
Antideflation measures will focus on wholesale tax reforms and large-scale tax cuts over the coming two years in a bid to fuel an economic recovery. Drastic reforms are also likely for securities-related taxes, paving the way for a shift to direct financing from bank loan-based indirect financing.
In addition, the supply-and-demand balance is improving on the stock market.
Sales to liquidate cross-shareholding ties have run their course since the fiscal 2001 book-closings, while market participants are pinning high hopes on public pension funds, which have set aside 1.7 trillion yen for stock investment this fiscal year.
Stock prices are expected to rise in stages, with favorable economic fundamentals and the improved supply-demand situation likely to hearten investors.
The only matter of concern now is foreign investors, who now account for 50 percent of trading on the Tokyo stock market. Close attention should be paid to them as they may retreat from the market if Japan’s political situation is thrown into confusion.
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