Prime Minister Shinzo Abe Fails to Revive Japanese Stocks

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Prime Minister Shinzo Abe Fails to Revive Japanese Stocks
Prime Minister Shinzo Abe Fails to Revive Japanese Stocks

Prime Minister Shinzo Abe Fails to Revive Japanese Stocks

Yesterday’s good trading failed to maintain its momentum today and Japanese stocks wilted on Prime Minister Shinzo Abe’s plan to raise consumption tax and introduce new fiscal stimulus. In today’s trading the benchmark Nikkei 225 index was down 2.2 per cent. Earlier investors had warned that a decision to raise the national sales tax won’t prompt them to leave the market after its strong rise this year; however, the performance of stocks proves otherwise.

Investors Selective in Their Buying

Investors seem more selective in their buying after Prime Minister Shinzo Abe formally announced Tuesday that he will go ahead with a plan to raise the national sales tax. Earlier the national sales tax was kept low at five per cent, now it has been raised to eight per cent. According to market observers the decision to up the sales tax is aimed to ensuring the sustainability of the social-security system the country has.

The Japanese Prime Minister also announced a new Y5tn ($51bn) stimulus package.

However, he deliberately delayed the stimulus for political reasons as according to analysts, there is no consensus in the ruling coalition about it and Shinzo Abe will have to flex muscles for that. According to sources whereas the prime minister wants the package to include corporate tax cuts, junior partner New Komeito is opposed to such reductions.

The U.S. Shutdown Could Send the Nikkei Below 14000

Investors in Japanese stocks believe that the U.S. government shutdown resulting from the impasse in Congress over the budget may fuel concerns about the fiscal outlook not only for America but also for the Japanese stocks which may fall below the 14000 level.

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U.S. Stocks Recover Losses despite the Government Shutdown

The biggest government shutdown in the last two decades does not seem to have any impact on the U.S. stock markets as many of the stocks recovered their losses during Tuesday trading. All the major U.S. markets opened up after falling sharply Monday and followed the trend where most of the major European and Asian markets were rising.

Whereas the Dow Jones was up 48 points 15,179 after the first hour of trading, the Standard & Poor’s 500 rose nine points to close at 1,690. Similarly, the NASDAQ composite rose 23 points, or 0.6%, to 3,795. According to market analysts investors are concerned over the looming row over raising the U.S. debt ceiling than the shutdown.

To contact the reporter of this story: Jonathan Millet at john@forexminute.com