At 11:30 a.m. on the 8th, when the breaking news that former Japanese Prime Minister Shinzo Abe was assassinated and in critical condition was delivered, the Tokyo financial market responded immediately. The Nikkei 225 Index, which had risen by more than 1.5%, sharply stopped its upward trend and ended trading in a strong trend.
View larger image
On the other hand, the yen per dollar rose from 136 yen to 135.30 yen. Yasunari Ueno, chief economist at Mizuho Securities, said, “Ex-Prime Minister Abe was the person who led the appreciation of the yen and the stock price. ” he analyzed.
Financial market experts interpreted the market’s sensitive reaction to the death of former Prime Minister Abe as heralding a change in Japanese financial policy. It also means that Abe’s presence in the Japanese market is that great.
Immediately following taking office in December 2012, former Prime Minister Abe signed a policy agreement with the Bank of Japan and strongly intervened in financial and fiscal policy. This is the beginning of ‘Abenomics’, which is represented by large-scale financial easing and aggressive fiscal expansion policies.
During Abe’s tenure as Prime Minister, the Nikkei 225 Index rose from 10,395 to 23,656. The 230% increase is the third highest among all prime ministers. The unemployment rate fell from 4.3% to 2.2%. This is why Abenomics is evaluated to have revitalized the Japanese economy, which had been suffering from a 20-year long-term recession. His successors, Yoshihide Suga and Fumio Kishida, also inherited the financial policies of former Prime Minister Abe.
However, many analysts say that the Japanese economy is suffering from the followingeffects of Abenomics. It is said that excessive reliance on financial easing and fiscal expansion policies weakened the fundamentals of the economy.
Japan’s national debt-to-GDP ratio is 256%, the highest among the G7 countries. At the end of March 2013, just before Haruhiko Kuroda took office as governor of the Bank of Japan, the Bank of Japan’s government bond holding ratio exceeded 50% at the end of last month, from 13%. The value of the yen, which has fallen to the lowest level in 24 years, is causing import prices to rise, taking a toll on small and medium-sized enterprises (SMEs) and low-income families.
Nevertheless, Governor Kuroda is repeating his view of “continuing large-scale financial policy steadily.” He is in the same position as former Prime Minister Abe, saying that large-scale financial policies should be maintained without worrying regarding national debt.
The death of former Prime Minister Abe is likely to affect the appointment of Kuroda’s successor, whose term ends in April next year, the Nihon Keizai Shimbun analyzed. Many lawmakers from the LDP’s largest faction, the Abéfa, need to continue large-scale financial easing even at the cost of a budget deficit to escape deflation. On the other hand, Prime Minister Kishida is a sound fiscal faction that calls for reducing the government’s fiscal deficit. It is analyzed that if Prime Minister Kishida’s influence grows stronger, there is a possibility that the governor of the Bank of Japan will be born to revise some of the monetary easing policy.
If Japan’s massive monetary easing policy, which has been ongoing for nearly a decade, is revised, the yen’s weakness will stop and the stock market will change, experts predicted.
Tokyo = Correspondent Young-hyo Jung hugh@hankyung.com
