The Modern Tokyo Times

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Japan shores up the stock market but speculators leave a sour taste

Japan shores up the stock market but speculators leave a sour taste

Lee Jay Walker

Modern Tokyo Times

Stock market is down in Japan

Stock market is down in Japan

The government of Japan pumped in trillions of yen into the stock market in order to shore up the capital base and to maintain global and domestic confidence.  At the same time many multitude problems are being tackled and this applies to research and rescue, nuclear plants which have been badly damaged, tackling the energy crisis, and a host of other major problems.

The Central Bank of Japan reacted swiftly to events which have been caused by the earthquake and tsunami.  Therefore, seven trillion yen was pumped into the money markets and this was followed by a further five trillion yen and the amount is astronomical.

However, it is clear that political leaders, economists and major corporations, understand the need to stop global jitters and to show that Japan is serious about stabilizing the situation.  Given this, the Bank of Japan desires to help the money markets and to restore some order amongst all the chaos.

The stock market still nosedived but frankly speaking this was only to be expected but the impetus of the cash infusion was welcomed by the financial sector.  The Nikkei which had recently pulled itself out of the global slump once more fell below 10,000 but the Japanese stock market welcomed the economic and political support that it obtained.

Moody had issued an alarming statement which stated that “……the natural disaster could bring forward the moment of a potential financial calamity, which would be the moment when investors lose confidence in Japan’s ability to repay its debts.”

This statement may be extremely pragmatic but when tens of thousands of people have just been killed by the earthquake and tsunami , then comments like this are adding to the woes of Japan.  After all, the nation needs breathing space and while international search and rescue operations are underway alongside domestic operations; the uncaring nature of the business world shows itself and is putting further strains on the government of Japan.

The Nikkei ended over 6% down despite the huge infusion of capital by the Central Bank. Production operations were stopped or curtailed by many major companies and this will lead to further strains on the economy of Japan.

Toshiba stocks fell by 16% but it must be added that this company produces semiconductors, nuclear reactors, and many other products, therefore, it was clear that the share price of Toshiba would suffer. 

Tokyo Electric Power Company fell by 24%, Hitachi was down by 16%, and Nissan and Honda had losses which were over 9%.  Nissan, it must be mentioned, shut down all their plants and many other major companies also suffered.

Alternatively, industrial and material companies went into the opposite direction and Nishimatsu Construction gained by 21% and other companies like Kajima gained by 17.9%.

Koetsu Aizawa who is an economics professor at the University of Saitama commented that “In the short term, the market will almost surely suffer and stocks will plunge….”  

“People might see an already weakened Japan, overshadowed by a growing China, getting dealt the finishing blow from this quake.”

In truth, many people will find it galling that investors are trying to make capital when tens of thousands of people are dead and missing.  This is capitalism in its raw and the same applies to writing off Japan during this crisis.

Japan keeps on being talked down but Japan’s global investments and reserves are huge, added to state of the art technology and having the capacity to ride out the strong yen. 

Therefore, Japan may rebound more quickly than people think but on the ground it is still about search and rescue and containing the nuclear issue.  However, for the stock market and many capitalists, it is about opportunities amidst all the chaos and mayhem.

The government of Japan is being pragmatic and it is clear that capital infusion was required.  Therefore, the Bank of Japan stepped in.  However, the coldness of this reality still leaves a sour taste when you see speculators making vast profits. This applies to investing in construction companies in the knowledge that they will be in demand because of all the carnage caused by recent events.

However, the business world ticks to a different clock!

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