Haruhiko Kuroda, the Governor of the Bank of Japan, backed the bullish views on the asset markets and he stated that Japan will be able to cope with the increasing interest rates after the stock market experienced a 1-day slump in last week. The volatility in bonds declined for a single day as well.
According to Kuroda, there are no signals that investors have any kind of excessive bullish expectations. He cited a BOJ report that came out in April. The report indicated that interest rates may rise by something between 1 and 3 percentage points, if an economy is improving, without causing any sort of financial instability. The Government bond yields of 10-year touched 1% on last week, thereby recording more than a triple of the record low experienced on 15th April.
The market volatility is currently threatening to sap the confidence in the campaign of Shinzo Abe, the Japanese Prime Minister and Kuroda, that aims to jolt the 3rd biggest economy in the world out of a deflationary malaise lasting for 15 years. In the first quarter, the growth has accelerated to the fastest pace in a year’s time and it is the duty of the policy makers to sustain the momentum after this growth. The benchmark stock gauge Topix Index jumped up by 39% in 2013; however the same was limited by a plunge of 6.9% experienced on 23rd May. The single day tumble of 6.9% is the biggest since the Tsunami and Earthquake in 2011.
According to the Senior Economist of JPMorgan Chase & Co., Masamichi Adachi, Kuroda is aiming to send a green light to those who are bullish on the economy markets of Japan. Adachi, who used to work as an official at the Central Bank, stated that there is no way that Kuroda will be showing concern at a time when the economy has experienced some positive developments.
Kuroda also explained the reason behind the increase in the risk of yields. According to Kuroda, the same is increasing because of concern over the sustainability of the debt of Japan. According to an estimate published by the International Monetary Fund, the same may actually reach around 245% of the total Gross Domestic Product right in this year. Kuroda also requested the Japanese Government to take some positive measurements and progress on the fiscal measures.