Get Ready For A Big Move In Japan
Jay Goldman | Oct 22, 2015 07:33AM ET
We expect to see a big movement beginning to form in the Japanese Market.
The Japanese Government, led by Prime Minister Abe, is expected to announce its latest round of Fiscal policy adjustment, labeled "Abenomics 2.0."
Abe was elected in December of 2012, on the platform that he will revive the stagnant Japanese Economy back to its peak, which was reached in the late 1980s, by introducing aggressive monetary and fiscal policies in order to beef up exports, increase inflation and cut down the unemployment rate.
The first part of "Abenomics," which was launched at the beginning of 2013, achieved just that, and the Nikkei almost doubled up its value, reaching a peak of 16,000 in November, while beginning the year at just under 10,000.
During this timeframe, unemployment fell to 3.7%, and annual growth reached 3.5%.
During the last few months, matters have not been running as smoothly; the slowdown in China has been a big hit to the Japanese economy that depends heavily on the Chinese buying power. Furthermore, recent reports have shown that industrial output has dropped and Gross Domestic Product contracted at an annualized rate of 1.6% for the second quarter of 2015.
The Nikkei dropped over 3000 points at the height of the selloff, which put it at a loss for the year.
These factors will force the Bank of Japan to act in its next policy meeting at the end of October, by either increasing their stimulus packages or introducing other structural reforms. Since the beginning of the week, we have seen the Nikkei climb about 500 points as investors are positioning themselves to take advantage of the expected rally in the aftermath of this meeting, and I am expecting the Nikkei to be trading at 19,500 in the first two weeks of November.
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