 "Nikkei Stock Average breaches 50,000-mark for the first time as Trump signals trade truce")
Japan’s Nikkei 225 index on Monday crossed the 50,000-mark for the first time as investor confidence rose from apparent progress in US-China trade discussions and strong performance in American markets.
The Nikkei 225 rose 2.42 per cent to reach the day’s high of 50,491.
Separately, the Tokyo Stock Price Index (Topix) also rose 1.61 per cent amid rising investor confidence.
The optimism is rooted in new Japanese Prime Minister Sanae Takaichi and her economic agenda. There are also hopes that she would be able to secure a good deal with US President Donald Trump, who will arrive in the country on a three-day visit on Monday.
In a note on Monday, Credit Agricole CIB said that Takaichi is expected to convey the significant expansion of domestic demand through a high-pressure economy, according to Mitrade.
The expansion of domestic demand could “completely lift Japan out of its deflationary structural stagnation” and also reduce the trade deficit with the United States, the Credit Agricole said.
The note further called the potential outcome “a win-win for both countries”.
Ahead of Trump meeting, Takaichi’s support surges
Ahead of the meeting with Trump, Takaichi’s support among Japanese has been high as her pitch for the economy appears to be working.
The Nikkei Asia’s survey found her approval at 74 per cent whereas newspapers Asahi and Mainichi reported approval of 68 per cent and 65 per cent respectively.
However, there are potential points of friction with Trump. As per the US-Japan trade deal, Japan had pledged to invest $550 billion in the United States but no project has yet taken shape. Trade minister Ryosei Akazawa has said that Takaichi’s governments remains committed to the investment pledge.
Impact Shorts
More ShortsOn Sunday, US Commerce Secretary Howard Lutnick had lunch with Akazawa in Tokyo. They are expected to help set up an investment fund.
In her first speech to the parliament, Takaichi last week said she would bring a stimulus at an appropriate time.
“To build a strong economy, we will strategically implement fiscal stimulus under the principle of responsible proactive fiscal policy,” said Takaichi, according to Nikkei Asia newspaper.
Takaichi also vowed to “achieve fiscal sustainability and retain the confidence of the financial markets”.
Takaichi said she will raise the basic income deduction to 1.6 million yen ($10,500) this year and increase the threshold as per inflation. She further promised to bring a tax exemption scheme for low-income households and a law to abolish a temporary tax on petrol.
Takaichi announced she will raise wages for essential workers like nurses and caregivers. She said she will launch discussions to reduce the social security insurance burden for working families.
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