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| Japanese Stocks Fall 5% With Growth Uncertain | |
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| HONG KONG — The Japanese stock market suffered another painful downward lurch on Thursday, extending a sell-off that began a week earlier as a feverish six-month rally came to an abrupt end. | HONG KONG — The Japanese stock market suffered another painful downward lurch on Thursday, extending a sell-off that began a week earlier as a feverish six-month rally came to an abrupt end. |
| A 5.2 percent slide sent the Nikkei 225-share index to 13,589.03 points, its lowest level since late April. It took the total decline since it peaked at nearly 16,000 points last week to more than 13 percent, formally making the decline a correction. | A 5.2 percent slide sent the Nikkei 225-share index to 13,589.03 points, its lowest level since late April. It took the total decline since it peaked at nearly 16,000 points last week to more than 13 percent, formally making the decline a correction. |
| European and Wall Street shares, however, were higher in Thursday trading. | European and Wall Street shares, however, were higher in Thursday trading. |
| Japanese officials were at pains on Thursday to play down the latest drop, saying it represented a natural development after the huge rally set off by optimism over Prime Minister Shinzo Abe’s efforts to haul the Japanese economy out of years of listless growth. | Japanese officials were at pains on Thursday to play down the latest drop, saying it represented a natural development after the huge rally set off by optimism over Prime Minister Shinzo Abe’s efforts to haul the Japanese economy out of years of listless growth. |
| “Over the past month, we have seen an extraordinarily fast rise in share prices,” Yoshihide Suga, the top government spokesman, said at a news conference. “In that regard, it would be unnatural if adjustments did not occur.” He added: “It is normal for share prices to undergo corrections even as they rise.'’ | “Over the past month, we have seen an extraordinarily fast rise in share prices,” Yoshihide Suga, the top government spokesman, said at a news conference. “In that regard, it would be unnatural if adjustments did not occur.” He added: “It is normal for share prices to undergo corrections even as they rise.'’ |
| The Nikkei soared more than 80 percent between mid-November and mid-May but staged a sudden about-turn last Thursday, when it slumped 7.3 percent. Trading has been volatile ever since, as investors have taken stock of the challenges that face Mr. Abe’s program, known as Abenomics, and weighed the pros and cons of taking profits after the previous rally. | The Nikkei soared more than 80 percent between mid-November and mid-May but staged a sudden about-turn last Thursday, when it slumped 7.3 percent. Trading has been volatile ever since, as investors have taken stock of the challenges that face Mr. Abe’s program, known as Abenomics, and weighed the pros and cons of taking profits after the previous rally. |
| Signs that the U.S. Federal Reserve might, before long, begin to scale back its stimulus efforts also have buffeted investor sentiment, as have higher bond yields in Japan and the recent end of a slide in the yen, which had provided a welcome advantage to Japanese exporters. | Signs that the U.S. Federal Reserve might, before long, begin to scale back its stimulus efforts also have buffeted investor sentiment, as have higher bond yields in Japan and the recent end of a slide in the yen, which had provided a welcome advantage to Japanese exporters. |
| The nervousness in Japan rubbed off on markets elsewhere in Asia on Thursday, though the declines were not as pronounced. The main indexes in Singapore and Taiwan dropped just over 1 percent. In Australia, the S.&P./ASX 200 fell 0.9 percent, and in Hong Kong, the Hang Seng Index slipped 0.3 percent. Stocks in Europe were slightly higher in afternoon trading, and Wall Street opened with little change. | The nervousness in Japan rubbed off on markets elsewhere in Asia on Thursday, though the declines were not as pronounced. The main indexes in Singapore and Taiwan dropped just over 1 percent. In Australia, the S.&P./ASX 200 fell 0.9 percent, and in Hong Kong, the Hang Seng Index slipped 0.3 percent. Stocks in Europe were slightly higher in afternoon trading, and Wall Street opened with little change. |
| Whatever the exact reasons for the past week’s slide in Japan, the speed and extent of it has started to bring to the forefront apprehension over Mr. Abe’s bold economic policies. With markets sputtering and nervousness over a spike in long-term interest rates, skeptics of Mr. Abe’s monetary and fiscal push are gaining more attention. | Whatever the exact reasons for the past week’s slide in Japan, the speed and extent of it has started to bring to the forefront apprehension over Mr. Abe’s bold economic policies. With markets sputtering and nervousness over a spike in long-term interest rates, skeptics of Mr. Abe’s monetary and fiscal push are gaining more attention. |
| “The falling share prices point to the dangers that are inherent in Abenomics,” Ryutaro Kono, chief economist for Japan at BNP Paribas and an outspoken critic of Mr. Abe’s economic policies, said in a note. | “The falling share prices point to the dangers that are inherent in Abenomics,” Ryutaro Kono, chief economist for Japan at BNP Paribas and an outspoken critic of Mr. Abe’s economic policies, said in a note. |
| The program “at first triggered an asset bubble and brought about an economic euphoria,” Mr. Kono said. “But the endgame is a higher risk of financial ruin, as current policies are pushed to the limit by a surge in long-term interest rates.” | The program “at first triggered an asset bubble and brought about an economic euphoria,” Mr. Kono said. “But the endgame is a higher risk of financial ruin, as current policies are pushed to the limit by a surge in long-term interest rates.” |
| A batch of data due out Friday is likely to be closely watched for evidence of how far Mr. Abe’s policies have succeeded in reinvigorating economic activity and combating the deflationary pressures that have weighed on Japan for years. The data, for the month of April, are expected to show that industrial output has improved and that deflation has abated somewhat. Analysts polled by Reuters forecast that core consumer prices have fallen 0.4 percent from a year earlier, an improvement on the 0.5 percent decline recorded in March. | A batch of data due out Friday is likely to be closely watched for evidence of how far Mr. Abe’s policies have succeeded in reinvigorating economic activity and combating the deflationary pressures that have weighed on Japan for years. The data, for the month of April, are expected to show that industrial output has improved and that deflation has abated somewhat. Analysts polled by Reuters forecast that core consumer prices have fallen 0.4 percent from a year earlier, an improvement on the 0.5 percent decline recorded in March. |
| “We think data will show that the Japanese economy has maintained a modest recovery trend” in the second quarter of this year, analysts at DBS said in a research note. | “We think data will show that the Japanese economy has maintained a modest recovery trend” in the second quarter of this year, analysts at DBS said in a research note. |
| On the other hand, the probability that prices continued to fall in April also highlights how tough it has been to combat deflation, and underlines the concerns of many analysts that the central bank’s aim of reaching 2 percent inflation in about two years will be tough to attain. | On the other hand, the probability that prices continued to fall in April also highlights how tough it has been to combat deflation, and underlines the concerns of many analysts that the central bank’s aim of reaching 2 percent inflation in about two years will be tough to attain. |
| Analysts and investors also are eager for progress on promised structural overhauls, which many see as crucial to the overall economy-lifting efforts of Mr. Abe’s government. | Analysts and investors also are eager for progress on promised structural overhauls, which many see as crucial to the overall economy-lifting efforts of Mr. Abe’s government. |
| The challenges are whether the government’s long-term growth strategy and fiscal reform plan will be “able to bolster investor confidence about Japan’s growth prospects and address their concerns about Japan’s fiscal health,” the DBS analysts wrote. “A credible reform plan is needed to avoid a deeper correction in the equity and bond markets.” | The challenges are whether the government’s long-term growth strategy and fiscal reform plan will be “able to bolster investor confidence about Japan’s growth prospects and address their concerns about Japan’s fiscal health,” the DBS analysts wrote. “A credible reform plan is needed to avoid a deeper correction in the equity and bond markets.” |
Hiroko Tabuchi contributed reporting from Tokyo. | Hiroko Tabuchi contributed reporting from Tokyo. |