This is an AI translated post.
Japan's Stock Market Soaring Despite Economic Downturn: Inflation and Monetary Easing Effects
- Writing language: Korean
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Base country: Japan
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- Economy
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Summarized by durumis AI
- As of May 2024, Japanese stocks have risen to levels seen during the bubble era, but with two consecutive quarters of negative economic growth, a significant divergence is evident between the stock market and the actual economic situation.
- The current stock market rise does not reflect an increase in real value such as corporate growth or improvements in quality of life, but is attributed to a nominal value inflation driven by rising prices and continued loose monetary policies.
- Instead of getting caught up in the stock market boom, it is crucial to recognize the gap between the economic situation and stock levels, and to strive for sustainable growth that reflects real value.
On February 22, the Nikkei 225 Stock Average in Japan closed at 39,098.68 yen, surpassing the previous record high of 38,915.87 yen on December 29, 1989. It continued to rise, reaching 39,233.71 yen on the 26th, marking two consecutive trading days of record highs.
However, despite the stock price surge at a level similar to that of the bubble period, it is likely that most ordinary citizens will find it hard to feel the reality of it. This is because Japan's recent economic situation has been deteriorating. Real GDP for the October-December 2023 period decreased by -0.4% year-on-year, marking two consecutive quarters of decline, and there is a possibility of continued negative growth in 2024. In particular, personal consumption, which is facing strong headwinds from rising prices, is very sluggish.
Thus, there is a large gap between the economic situation and the stock price level, which is exceeding that of the bubble period. It can be said that the stock price rise is something that cannot be felt.
It is important to note that the current stock price rise does not reflect the actual value increase, such as improved economic growth or corporate performance in Japan, enhanced productivity contributing to improved quality of life, and strengthening international competitiveness.
Rather, the stock price rise simply reflects the inflation of nominal values, such as rising prices, and is a hollow phenomenon caused by inflation. Moreover, the exceptionally persistent monetary easing policy, even in a historical inflation situation, is also strongly supporting the stock price rise by lowering real interest rates (nominal interest rate - expected inflation rate) and fueling yen depreciation. This stock price rise is the result of a combination of these two factors: nominal value inflation and financial phenomena.
It is necessary to be wary, as this high level of stock price surge is not the time to be intoxicated.
