Shares in Japan’s Nikkei index bounced on the latest government stimulus measures and will look to mount a year-end rally.
JPN225 – Daily Chart
The JPN225 rose back above the 50,000 level on Wednesday and and further gains into Friday could set up a December rebound.
Strength in the U.S. stock market this week has boosted the Japanese rally and has ended the fears of an AI-driven bubble burst.
The Japanese yen will again play an important role in Japan’s stock market after recent weakness in the currency. Traders have sold the yen after the government announced a large stimulus plan. Shares rallied again after the spending plan was announced, driven by hopes of additional economic growth.
Japan’s Cabinet approved a 21.3 trillion yen ($135.4 billion) stimulus package last week to help boost the economy through government spending and to reduce the impact of higher prices. New Prime Minister Sanae Takaichi has promised to boost government spending despite concerns that this will delay progress on cutting the country’s national debt, which is currently around three times the size of its economy.
“Through wise spending, we will change worries into hope and achieve a strong economy,” Takaichi said.
“What we should do now is to strengthen the national power through expansionary spending, through wise spending, and not to cause harm through excessively contractionary policies,” she added.
The move is also an effort to help the economy after exports to the U.S. fell in October for the seventh straight month, the government reported. Shipments to the rest of the world rose 3.7%, driven by higher exports to Asia. A weakening yen may also boost demand for Japanese products, although markets were reeling from a Chinese travel warning following a geopolitical dispute between the two countries.
