Japan Economic Strength Will Show in Stocks, Nishimura Says

Japan’s deputy economy minister said he’s confident the nation’s economic recovery will be seen in share prices after next month’s elections.

“I’m optimistic and expect the strength of the Japanese economy will be reflected in the stock market,” Yasutoshi Nishimura, 50, said yesterday in an interview in Tokyo. Markets are likely to “positively rate the government’s policies after the upper house elections once they see how determined we are to implement them.”

Victory for the Liberal Democratic Party-led coalition in the ballot planned for July 21 would end a split parliament that has slowed the passage of bills. The government’s task will then be to ensure its growth strategy -- the third of the three Abenomics arrows after monetary and fiscal stimulus -- produces a sustained recovery in the world’s third-largest economy.

The Nikkei 225 Stock Average hit a high of 15,942.60 on May 23, up more than 80 percent from mid-November last year. The benchmark was at 13,135.52 at 10:07 a.m. in Tokyo today.

The release of the mid-term fiscal outlook in August should help stabilize bond yields, Nishimura said. The yield on the benchmark 10-year bond was at 0.87 percent today, after tripling from a record low of 0.315 percent to as high as 1 percent since April.

Nishimura said concerns over the direction of the Chinese economy and the U.S. Federal Reserve potentially slowing its bond-buying program have been a cause of market turbulence in Japan.

“Firm Ground”

“While external factors have had some influence, the Japanese economy is on extremely firm ground,” Nishimura said in his Tokyo office. The economy should be in a position to allow the government to raise the consumption tax to 8 percent in April next year from the current 5 percent, he said.

The LDP is set to win next month’s election for the upper house, where the government currently lacks a majority. A survey published by the Nikkei newspaper on June 24 found 47 percent of respondents planned to vote for the party in the proportional representation section of the poll.

Nishimura declined to comment yesterday on the yen’s level. When the currency was trading around 89 to the dollar in January, he said in an interview that a level of 100 wouldn’t be a problem, a remark that caused the yen to weaken.

The yen reached an almost five-year low in May before rising more than 5 percent over the past month. The currency traded at 98.09 per dollar in Tokyo today.

Volatility Eases

Nishimura also said that political stability after next month’s poll would help ease volatility in government bond markets following the Bank of Japan’s unleashing of monetary easing in April.

“In terms of properly preserving fiscal discipline, the publication of our mid-term fiscal outlook in August should help to stabilize yields,” Nishimura said. “We have to properly maintain confidence in government bonds.”

Nishimura will be in New York on June 28 to explain Prime Minister Shinzo Abe’s growth strategy. He will be joined by Abe adviser Koichi Hamada, an architect of Abenomic’s first arrow of “bold” monetary easing.

A native of Akashi in western Japan’s Hyogo Prefecture, Nishimura graduated from the Faculty of Law at Tokyo University, where he was member of the boxing club. He joined the trade ministry in 1985 and was elected to the lower house of parliament for the first time in 2003.