TOKYO: Japanese officials kept markets guessing yesterday on their response to slumping share prices, offering only hints of possible action even as investors doubted whether anything the government did would be effective.
In what has become an annual ritual near the end of Japan’s financial year on March 31, policymakers and the central bank met to start cobbling together a package to support the fragile economy and limping stock market.
Their usual sense of alarm before the March book-closings has been all the more acute this year as stocks plumb 20-year lows amid global concern over a looming war in Iraq.
The ideas being floated ranged from making the Bank of Japan (BoJ) buy more government bonds and even more stocks to backtracking on plans for stricter accounting rules. There are also calls for massive intervention in the currency market to curb the yen’s strength, which crimps exports.
“Some of the proposals may make sense. But the fact that they are floating all these ideas shows how they have run out of ammunition. It’s deplorable,” said Mamoru Yamazaki, the chief economist at Barclays Capital here.
The stock market’s benchmark Nikkei average clawed back up yesterday from Tuesday's 20-year lows on hopes that the government would do something – as it has done almost every year – and the yen pulled back from last week’s seven-month highs against the US dollar.
The government sought, however, to avoid raising expectations too much.
“Officials from ministries in charge of markets met today and exchanged information,” Vice-Finance Minister Masakazu Hayashi said after the meeting. “We did not come up with any conclusions, but we will hold more meetings in the future if necessary.”
One reason for the government’s reticence may be faint signs that the economy is recovering from its decade-long slump.
Data showed yesterday that orders for new machinery at Japanese companies rose a surprising 7% in January from the previous month, stirring optimism that firms are starting to spend growing profits on plant and equipment. – Reuters