Published On: Tue, Nov 4th, 2014

Is the Nikkei Rally the Real Deal, or Was It Just a Flash in Japan?


The Nikkei rose 3.8% to 17, 028, it’s highest one-day jump since 2007. What spurred the rally was the news that the Japanese government is going to stimulate the economy. Japan’s economy has been in the doldrums for a while, and there has been talk of transforming the economy from an export driven  to consumer driven. While this won’t happen overnight, a short-term stimulus is bullish for the Japanese economy.

Skeptics say the rally was just a short covering and won’t last, but CNBC’s Daniel Weiner thinks it is “the real thing. You have a sea change in the concept of risk. The government pension fund said we are going to buy more equities and cut down purchases of fixed income .. and the market is following suit.”

The Japanese government is willing to expose itself to greater risks to promote growth. It announced that 25% of the government pension fund will be made up of Japanese and foreign stocks, a gain of 12% and would reduce its exposure to bonds from 60% to 35%.

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