{"id":37305,"date":"2013-04-04T21:04:46","date_gmt":"2013-04-05T01:04:46","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37305"},"modified":"2013-04-04T21:04:46","modified_gmt":"2013-04-05T01:04:46","slug":"im-bullish-on-the-japanese-stock-marketheres-why","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/04\/im-bullish-on-the-japanese-stock-marketheres-why\/","title":{"rendered":"I\u2019m Bullish on the Japanese Stock Market\u2026Here\u2019s Why"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a> <\/p>\n

The market is used to being disappointed by Japan.<\/p>\n

Investors were clearly holding their breath as the new central bank chief, Haruhiko Kuroda, prepared to announce his big plans for jump-starting Japan’s market<\/strong> out of deflation.<\/p>\n

For once, they needn\u2019t have worried.<\/p>\n

After Kuroda revealed the central bank\u2019s latest decisions, the Nikkei 225 rocketed and the Japanese yen<\/strong> tumbled against the US dollar.<\/p>\n

Clearly, it worked.<\/p>\n

And the good news for investors in Japan is that this could be the final push needed to convince the wider market that this time, Japan really is on the comeback trail…<\/p>\n

The Bank of Japan Proves Itself<\/h2>\n<\/p>\n

So what did Bank of Japan<\/strong> boss Kuroda \u2014 already being described as \u2018Japan\u2019s Ben Bernanke\u2019 \u2014 do?<\/p>\n

The Japanese have been fiddling with monetary policy for so long that it\u2019s hard to keep on top of all the bells and whistles in their system. The short answer is that Kuroda promised to \u2018do what it takes\u2019 to drive Japanese inflation up to 2%.<\/p>\n

In itself, that was enough to get investors excited. Prime Minister Shinzo Abe had showed signs earlier this week of rowing back from the idea that the 2% target was readily achievable.<\/p>\n

As for how it\u2019s going to do it: well, firstly, the Bank of Japan will buy \u00a57trn worth of bonds each month. That\u2019s double what it currently buys, and a far bigger jump than the market had expected. In other words, it\u2019ll do more quantitative easing (QE) than the market had thought.<\/p>\n

Secondly, it has changed what it\u2019s buying. On the bond side, it will be buying longer-dated government bonds<\/a> (up to 40-year maturities). So long-term interest rates will be squeezed lower.<\/p>\n

On top of that, it\u2019s also going to increase its purchases of even riskier assets such as exchange-traded funds and real estate investment trusts. So it won\u2019t just be using QE to buy government bonds. It\u2019s also printing money to buy equities, albeit in relatively small amounts. (This sounds extreme but believe it or not, the BoJ has been doing this for a while.)<\/p>\n

Thirdly, the BoJ has suspended its \u2018banknote rule\u2019. This was a sort of speed limit on QE. It prevented the BoJ from buying more bonds than there were bank notes in circulation. Apart from anything else, this shows the BoJ is serious.<\/p>\n

As if all this wasn\u2019t enough, Kuroda had the backing of almost the entire BoJ board. So there\u2019s very little to stop him getting even more radical.<\/p>\n

Why is This Different from What Ben Bernanke is Doing?<\/h2>\n<\/p>\n

The point of all this is to get the Japanese economy<\/strong> moving again. In nominal terms (ie, without taking deflation into account), the Japanese economy<\/a> is no bigger than it was in 1992, notes Peter Tasker in the Financial Times<\/em>.<\/p>\n

Meanwhile, the strong yen has been punishing Japan\u2019s crucial export industries. Weakening the yen will boost exports. And encouraging nominal growth (even that driven by inflation) will help to improve the country\u2019s debt-to-GDP ratio.<\/p>\n

One reader raised a very good point the last time I wrote about this: how is this any different to what Federal Reserve chief Ben Bernanke is doing in the US?<\/p>\n

The answer is: it\u2019s not. And as far as I\u2019m concerned, the jury\u2019s still out on how much good QE actually does for the real economy. You can easily make the case that the (very fragile) US recovery is down to its more aggressive treatment of the banks, the fact that its housing market crashed, and the fact that it can exploit shale oil and gas.<\/p>\n

But there\u2019s one thing that QE does seem to do: and that\u2019s boost asset prices. And with every other major nation in the world trying to trash or defend its currency, Japan can\u2019t stand by any longer and let itself be the one that carries the fall-out.<\/p>\n

What I also like about Japan is that even after the Nikkei 225 has risen by more than 40%, there\u2019s still a lot of scepticism about the market. Investors clearly expected the BoJ to disappoint them. This may be the trigger that the sceptics need to convince them to join the party.<\/p>\n

John Stepek
\nContributing Editor, Money Morning<\/em><\/strong><\/p>\n

Join Money Morning on Google+<\/u><\/a><\/strong><\/p>\n

Publisher\u2019s Note<\/em>: This article originally appeared in Money Week<\/a><\/em> <\/p>\n

From the Archives…<\/strong><\/em><\/p>\n

Why Dividend Stocks May Not Stay This Cheap for Long<\/a>
\n29-03-2013 \u2013 Kris Sayce <\/p>\n

Respect the Market Trend, but Don\u2019t Expect it to Last<\/a>
\n28-03-2013 \u2013 Murray Dawes <\/p>\n

Silver \u2018$100 Within Two Years\u2019<\/a>
\n27-03-2013 \u2013 Dr. Alex Cowie <\/p>\n

11 Billion Reasons to Expect a 200% Move in Gold Stocks Within Months<\/a>
\n26-03-2013 \u2013 Dr. Alex Cowie <\/p>\n

You Want Proof the Stock Market\u2019s Heading Up? Try This…<\/a>
\n25-03-2013 \u2013 Kris Sayce<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au The market is used to being disappointed by Japan. Investors were clearly holding their breath as the new central bank chief, Haruhiko Kuroda, prepared to announce his big plans for jump-starting Japan’s market out of deflation. For once, they needn\u2019t have worried. After Kuroda revealed the central bank\u2019s latest decisions, the Nikkei 225 … <\/p>\n

Continue reading “I\u2019m Bullish on the Japanese Stock Market\u2026Here\u2019s Why”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-37305","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37305","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=37305"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37305\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=37305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=37305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=37305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}