Generally speaking, easing can drive stocks up, but this has not happened to the Japanese stock market, and it has become the runner-up of the world's major stock market decline lists this year: second only to Italy. So why is Japan being collectively abandoned by investors?
On the 11th, the Japanese stock market Nikkei 225 index fell again by 0.44% to 15751 points. So far, the Nikkei 225 index has fallen by 17.25% this year, surpassing the 16.23% of the Shenzhen Component Index, becoming one of the worst performing stock indexes in the world's major stock markets. In stark contrast, the U.S. stock market Dow and S&P 500 have recovered what they lost this year, and even the poorer-performing German and French stock markets have fallen by only 10% and 7% this year.
While accommodative monetary policy has helped drive stocks higher, Japan's easing doesn't seem to be effective when measured by stock market performance. For easing, the Bank of Japan has spared no effort. In January, the Bank of Japan unexpectedly introduced a negative interest rate policy, introducing a three-tier interest rate system that reduced the interest rate on some excess reserve deposits deposited by financial institutions with the Bank of Japan from the previous 0.1% to -0.1%. Although BoJ Governor Toshihiko Kuroda pointed out that the bank may cut negative interest rates further, market participants generally believe that there is not much expectation of what more such easing measures will bring. More analysts believe that financial markets have determined that the Bank of Japan's negative interest rate is a failure, showing that in the turbulent situation of global markets, the bank has few options for stimulating economic growth.
In fact, Japan has been implementing a super loose monetary policy for 3 years, but the effect is very small, in the fourth quarter of 2015, the Japanese economy fell into recession again, deflationary pressure lingered, real wage growth was weak, credit demand is still weak, and now even the yen is beginning to run counter to the will of the authorities. Market data shows that the yen exchange rate has been climbing since the beginning of this year, especially after Japan announced that it has entered the era of negative interest rates, the yen has performed more eye-catchingly, last week to refresh the 17-month high, breaking through the 108 mark, the yen has appreciated nearly 10% against the US dollar this year. Not only that, a transcript of a recent conversation between Japanese Finance Minister Taro Aso and Nobel Laureate in Economics Krugman was exposed. Krugman mentioned that no matter what the Bank of Japan does, the yen will appreciate due to continued weakness in other major economies.
The further appreciation of the yen will lead to a decline in the performance of large-cap stocks such as automobiles and electric machinery. For every integer unit of yen appreciation of the yen against the dollar, Toyota's earnings fall by about 40 billion yen. In addition, the decline in resource prices has made the performance growth of some integrated trading companies and steel companies difficult.
Pessimistic about Abenomics and the outlook for the Japanese economy, coupled with the continued appreciation of the yen, Bloomberg data shows that foreign investors have withdrawn $46 billion from The Japanese stock market this year, and investors have sold Japanese stocks for thirteen consecutive weeks, the longest sell-off since 1998. In addition, in order to ensure current fiscal funds, investment funds in oil-producing countries, known as "oil money", will continue to sell stocks and switch to cash. In the case of the Japanese stock market, the sell-off of "oil money" will further exacerbate the sell-off wave of overseas investors.
Nader Naeimi, head of marketing at AMP Capital, said: "The performance of the Japanese stock market has been disappointing, and many people have begun to question Abenomics. It is reported that Naeimi has long been very optimistic about the Japanese stock market, but now he wants to see the opportunity to short sell Japanese stocks.
In September 2013, when Japanese Prime Minister Shinzo Abe shouted "Japan is back" and "Buy my Abenomics" on the New York Stock Exchange, a large amount of money poured into the Japanese stock market. Today, half of the money has left. Overseas investors have always been important players in the Japanese market. Between 2012 and 2015, overseas investors bought a net of 18.5 trillion yen in shares, equivalent to 70 percent of Tokyo stock trading. The loss of foreign investor support is undoubtedly a heavy blow to Shinzo Abe, japan's prime minister, who is the most active investor in the Japanese stock market, which he has always seen as a touchstone in his growth strategy.
