This is an AI translated post.
Japan's Economy and the Disconnected Rise of the Japanese Stock Market Amidst Inflation and Monetary Easing
- Writing language: Korean
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Base country: Japan
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- Economy
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On February 22, the Nikkei Stock Average reached 39,098.68 yen (closing price), surpassing its previous high of 38,915.87 yen recorded on December 29, 1989. It further climbed to 39,233.71 yen on the 26th, marking a consecutive two-day high.
However, despite the stock price surge reaching levels similar to the bubble period, most ordinary people are unlikely to feel its impact. This is due to the recent deterioration of the Japanese economy. Real GDP for the October-December 2023 period contracted by -0.4% year-on-year, marking the second consecutive quarter of decline, and there is a possibility of negative growth continuing into 2024. In particular, personal consumption, facing a strong headwind from rising prices, remains extremely sluggish.
Thus, there is a significant gap between the economic situation and the stock price level, which has surpassed that of the bubble period. It can be said that the stock price rise is not something that can be readily felt.
It is important to note that the current stock price surge does not reflect a substantial increase in value, such as improvements in the Japanese economy or corporate growth, labor productivity improvements that contribute to improving the quality of life, or strengthening international competitiveness.
Instead, the stock price increase merely reflects a nominal value inflation due to price increases, a mere superficial phenomenon caused by inflation. Furthermore, the unusually persistent monetary easing policy in the midst of historically high inflation is contributing to a decline in real interest rates (nominal interest rate - expected inflation rate), fueling yen depreciation and strongly supporting the rise in stock prices. Thus, the stock price surge is the result of a complex interplay of both nominal value inflation and financial phenomena.
It is necessary to exercise caution and avoid being complacent about the high level of stock price increases.
