Economy Minister of Japan, Akira Amari believes that the Government of Japan should demonstrate a commitment in fiscal rehabilitation for boosting the credibility of the Government bonds. Such steps should prevent a spike in the long term yields as well as if the stocks increase, it should damp the allure of the sovereign debt of the country.
According to Amari, the stocks have experienced high rallies in this year and hence, it’s pretty obvious that the capital will now shift to stocks, from bonds. Hence, it is important to enhance the credibility of the Government bonds in an attempt to prevent any sort of increase in the long term yields.
On last Friday, the benchmark stock gauge of Japan, the Nikkei 225 Stock Average closed at 15,138.12 which is the highest figure since 28th December, 2007. On the other hand, the yields on the Japanese Government bonds of 10 years are currently at 0.795%. Thereby, these have capped the weekly gain of 10.5 basis points. As far as the benchmark yield is concerned, it jumped up to a record high of 0.92% on 15th May, recording the highest value in more than a year’s time.
The Nikkei has recorded a gain of 46% in 2013 after the Prime Minister of this Asian country, Shinzo Abe decided to take actions for beating deflation. Apart from that, the Bank of Japan introduced unprecedented monetary easing, thereby lowering Yen, the major currency of Japan. As far as statistics of 17th May is concerned, Yen was at 103.31 per USD, marking the weakest figure since October, 2008. Decline in Yen however has boosted the overall outlook for the exporters.
Amari thinks speed of Nikkei 225’s surge has been faster than expectations. He, however, refrained from making any comment on appropriate exchange rate for Yen. He didn’t answer when asked about the point where the negative effects of Yen’s decline should be contained either. He thinks that the excessive gains of Yen have been corrected and now it’s important to notice that the currency does not extend losses a lot either, as that will be negatively affecting peoples’ lives.
Amari announced that Japanese Government will be deciding whether consumption tax should be increased or not, around October. Amari stated that whether Japanese economy has shifted to an uptrend or not, can only be confirmed then.