Japan’s stock market, for years assumed by many to be stuck in the same “lost decades” trap as the wider economy, had seemed on the road to recovery, but the last 12 months could be seen as disappointing.
Thestood at 22,380.0098 on 14 November last year and closed last night at 21,846.4800.
During the last month, the index declined from 22,271.3008 on 15 October and over the course of the last three months the fall has been from 22,356.0801 on 14 August.
Yen is key influence
The three-monthly highs and lows paint a somewhat more nuanced picture than one of a steady decline in stock values. On 2 October the index peaked at 24,270.6191 and on 29 October it hit a trough of 21,149.8008.
On an annual basis, the Nikkei seems to find support at just over 20,000 and to meet resistance at anything much above 24,000. The high point during the last 12 months was, again, on 2 October, the abovementioned 24,270.6191, while the low point was on 23 March at 20,617.8594.
Those of a bullish disposition may draw some comfort from the fact that the trough was seen towards the start of the 12 months, while the peak was much more recent. They may be cheered further by looking at the longer-term trend, seen during the last five years.
A number of influences are at work on Japanese share prices, not least the asset-inflating effects of the huge stimulus the government has injected into the economy. Then there is the impact of the value of the on the country’s formidable export machine – broadly speaking, the stronger the value of the currency, the harder it is to sell into foreign markets, because goods will be more expensive in local currency terms.
Deflation remains a worry
Comparing the value today, $113.9100, with the level of a year ago, $113.4550, suggests little movement. In fact, the yen has been on a strengthening trend since the 12-monthly low of $104.755 on 23 March, and the high point was seen last month, at $114.535 on 3 October.
Support for Japanese stocks in recent years has come from greater market awareness of the changed atmosphere in many company boardrooms, with a stronger emphasis on providing returns for shareholders and on unwinding the cross-shareholdings that have long been a feature of corporate life.
“However, inflation, public debt sustainability, and growth objectives remain to be secured.”
A “durable exit from deflation” had yet to be achieved, the IMF added.