Will the Third Growth Strategy Help Boost Japan’s Economy?
The Nikkei Average, which had a tremendous run thanks to the Abe Bubble, has battered significantly over the past two weeks. By the close of business May 23, the index had dropped more than 1,100 yen from the previous day’s closing price. The decline didn’t stop there, with the Nikkei sliding 470 yen on the 27th and 737 yen on the 30th. In June the Nikkei shed more than 500 yen on the 3rd and 5th, losing nearly 20% from the intra-day high of 15,942 yen recorded on May 23 to the closing price of 13,014 yen on June 5.
The index seems to be near its bottom point, following a period of volatility. At the end of the day, the real economy is improving steadily. The Upper House election is scheduled for July, and in September the International Olympic Committee will announce the site of the 2020 Olympic Games, for which Tokyo is a candidate. As there are many potential public investment projects, there is no room for pessimism.
I disagree, and I believe the stock prices will continue to drop. It is true that there are high expectations for Abenomics, but all the positive effects of Abenomics have already been digested by the market, which seems to have run out of breath after a sudden upturn backed by strong indicators. Now, investors can rarely find any positive factors or encouraging data.
The big question is whether the third growth strategy will succeed. Designed to fuel a “big leap in private sector power/activity,” the new growth strategy is expected to produce results. I hope it will trigger another round of a bull market . . . .