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On the last trading day of the year, Japanese shares posted their best annual performance for more than four decades, leaving other major markets in the dust.
Foreign investors piled into the long-laggard Japanese market in 2013 as the government and central bank unveiled measures aimed at stoking the economy that sent the yen plummeting against the dollar and cheered exporters.
The benchmark Nikkei 225 index finished Monday up 0.69% at 16,291.31, about 57% higher than its 2012 close of 10,395.18. The broader Topix index of all first-section shares, up 0.95% on the day to 1,302.29, soared nearly 52% from a year ago.
"This has been a boom year -- it's been a long time since we've seen such a robust performance," said Hikaru Sato, a senior technical analyst at Daiwa Securities.
"The rise beat most investors' expectations and many seem to think it will be another boom next year."
The Japanese currency has lost about a fifth of its value against the greenback since the start of the year, providing a much-needed boost to exporters such as Sony and Toyota, whose goods become more competitive overseas.
In afternoon Tokyo trade, the dollar bought 105.32 yen, well up from the 87 yen level at the end of last year.
The Nikkei's performance this year was its best since 1972 when it nearly doubled, outpacing a booming Wall Street which has seen the Dow and S&P 500 power to record highs.
However, it remains a shadow of its former self. The market peaked at almost 39,000 in the last days of 1989 before Japan's asset bubble popped, dealing a huge blow to the economy and sending the Nikkei plunging over the next two decades.
And despite the upbeat mood in the market, fueled by a strong pick-up in the US economy and improvements domestically, traders have mixed feelings about what to expect in 2014.
While the most bullish say Prime Minister Shinzo Abe's big-spending policy blitz aimed at kickstarting the economy is a key confidence driver, some offer a word of caution.
"I expect the Nikkei to rise to the 20,000 level next year," said Seiichi Suzuki, market analyst at Tokai Tokyo Securities. "Abenomics has contributed a lot to the market in terms of risk sentiment."
Major Japanese brokerage house Nomura Securities had more modest forecasts, saying it expected the Nikkei to see-saw through the year before ending at around 18,000.
"We keep our view that Japanese share prices will remain on an upward trend next year, on the back of an increase in companies' profits and expectations for Abenomics," it added.
Despite Abe's much-lauded start since sweeping elections a year ago, analysts warn that his pro-growth program -- a mix of big government spending and central bank monetary easing -- is not enough without promised economic reforms.
Legislators have passed a bill that paves the way for an opening up of the electricity sector and Abe is pushing through an attempt to strip away protections for the agricultural sector. But it remains to be seen if deeper reforms are in the offing.
And with a sales tax rise planned for April, there are fears that consumer spending will take a dive and stall a budding recovery.
Tokyo has committed about $54 billion in extra spending to blunt the impact of the tax rise, while there is growing speculation the Bank of Japan will step in with another round of monetary easing to prop up growth.
The central bank launched an unprecedented easing campaign earlier this year to help reverse years of deflation, which in turn helped push down the yen.
But Credit Suisse research analyst Hiromichi Shirakawa said: "If the BOJ opts not to launch more easing... that could end the pattern of a cheaper yen and rising share prices".
© (c) 2013 AFP
19 Comments
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smithinjapan
Keep these positive economy reports coming, because come April...
gaijinfo
1) Central Banks Print Money
2) Stock Markets Go Up
3) Economically Illiterate Media Think Everything If Fine
4) Economic Programs are deemed a "Success"
5) Central Bank Prints MORE Money
6) Inflation Creeps Up
7) Central Banks Tighten In Order to "stop inflation"
8) Inflation either runs away, turns into hyper inflation, and wrecks the economy
OR
9) Higher interest rates kill an already weak economy, and wrecks the economy
All Roads Lead To Rome
toto_kiboko
I am not an Abenomics fan. But there are facts that bewilder me! Lehmann Brothers collapse cost my friend five million yen! In the year 2013, he has just informed me his financial status has had a dramatic about turn! He has not only recovered all his losses since 2008 but also registered a profit of more than seven million! If that is not the Magic of Abenomics, I do not know what is!!!
Tokiyo
could something called hard work and better choices have something to do with it? Abenomics because its convinient - please.
FernandoUchiyama
I would like to see someone coming with arguments saying why Abenomics is bad. I see some people complaining and saying bad things about Abe, but actually nobody gives any reason. My way of seeing it is that Abe is one of the greatest japanese politicians I have ever seen.
overchan
The economy of the rich. I have no money for invesying but im a simple salaryman with 4 girlfriends
CrazyJoe
Given the unprecedentedly all-time high increase in the Nikkei 225 Index, an adjustment is rather natural where there is no sign of risk aversion.
thkanner
another bubble in the making, humans never learn from mistakes. they print money and push the markets up and call the abe guy a genius... i call it insanity
gaijinfo
Incorrect.
Insanity is doing the SAME THING over and over and expecting different resul....wait...
my bad, you're right.
kaimycahl
@overchan at Dec. 30, 2013 - 08:17PM JST The economy of the rich. I have no money for invesying but im a simple salaryman with 4 girlfriends
Thats is the funniest joke I have read ending my new year. Perhaps you are in the wrong business 4 girlfriends. Are you sure you are JUST a simple salaryman? !!!Clever one!!!! I must say
kibousha
QE is not money printing. For those interested, google "Modern Monetary Theory". Japan has been doing QE since 2000, and as everyone know, it didn't produce inflation. The problem is Japanese are big savers, and all save no spend is not good for our credit base money.
jeff198527
Kibousha, QE IS money printing. As for stocks, every seven years since 1987 there has been either a stock market crash or, as in 1994, a bond crisis. Japan is most likely sterilizing their QE and allowing a mild deflation to take hold.
nath
The market's been looking for every excuse to rally, it found it in Abe's abenomics changes. Actually it's not his policies that made things better, it is the fact that some changes took place, any changes The US markets did extremely well in the last two years. Japan's market took a ride with it.
But it's all a mirage. The fundamental problems are still there. It would take some truly courage changes to make things better for the long run. Abe's aim isn't really economic. He wants Japan to step out of the American shadow and become a military powerful state. The economics is only a cover. But the cover is coming off, the Japanese people is finding that their financial situation has not gotten better in real terms.
Jean ValJean
Inflate, inflate, inflate.... oops! POOF!!!
How many bubbles do Keynesians make? All of them! And they ALWAYS end with a violent implosion. Ready, set, burst!
Liu Bruce
Guys, study a little bit of elliot wave theory, you could find Nikkei is approaching the 5 th wave's end for the medium term.
JeffLee
That doesn't make any sense. The 2008 financial disaster was caused by the reckless lending of the financial industry seeking short-term profits. Same with the Japan bubble of 1989, Wall St. 1930, etc.
"Keynesian" policies have nothing to do with asset/price bubbles, and in fact they're needed to repair the damage inflicted by free-market policies.
jeff198527
Why would anyone willingly lose money every seven years? Capitalism may need capital, as one poster on another topic said, but the crony capitalists aren't getting a dime from me.
globalwatcher
Jean ValJeanDec. 31, 2013 - 02:07PM JST
Smart investors will sell it by end of 1st quarter.