New Coalition Government Policy, High Yen and Supply & Demand Oppressing Japanese Companies, Being Behind Worldwide High Stock Prices Trend

Sunday, September 19, 2009 – Osaka, Japan

Nikkei, Japan's leading newspaper specialized in economy and politics, reported today that Japan is behind worldwide trend of high stock prices. This is because of the stock price drop of companies especially those engaged in business related to investment in public sector and finance, even though stock prices of electronics benefitting from demand recovery of ubiquitous networking devices and energy benefitting from increase in international commodity price have risen. This implies that majority of Japanese companies may well be negatively impacted due to the 3 anxieties, and same goes for Japan branch of foreign capitals.

Nikkei reports that although global slowdown is observed to have hit the bottom is supporting the lower price, 3 anxieties are acting as oppression burden, leading to drop in stock prices of majority of Japanese companies. The 3 anxieties are:- a)uncertainty of new policy under coalition; b)anxiety of further proceeding of high yen; and c)deterioration of supply & demand attributing to decrease in investing from foreign capital.

The new ruling party of the DPJ advocates that manufacturing companies basically should stop utilizing dispatched employees, and this would mean increase in their cost in general. The DPJ also advocates 25% reduction of CO2 emission vs.1990 by 2020, which is in line with global trend, but could be a big burden for iron and steel manufacturers and electric power companies. Furthermore, the recent comment about moratorium of Mr. Kamei, the new Financial Services Minister who is also responsible for postal services, already had impacted negatively to the Japan stock market.

And the recent comment of Mr. Fujii, the new Treasury Minister, could be interpreted as accepting high yen, leading to the second anxiety. The assumed exchange rate for 2009 major manufacturing companies announced by Tankan in July was 1 US dollars = 94.85 yen, but the recent exchange rate had been of higher yen than this already. This means that expectation for upward adjustment of financial achievement could recede.

Attitude of foreign investors who had been the only investor of Japanese stocks is changing because they want to see how the new coalition government takes off. Indeed, they had been active in buying Japanese stocks from April to August this year but in September they had been selling more than buying.

Looking at the ranking of fluctuation of their average stock price after the general election on August 30, top 10 companies that had gone up are mostly electronics and energy companies. The no.1 company of SUMCO (an electronics company) went up as much as15%. On the other hand, the worst 10 companies, i.e. companies whose stock price dropped the most after the general election are mostly financial institutes.

Since stock price tends to lead the actual business and economy, the above fact is an implication of the possible challenges the companies face in the upcoming future. Also, although the above is all about Japanese companies, it is possible that Japan branches of foreign capitals are to be impacted similarly because they are players in the same game; they operate in the same Japanese business environment and under the same Japanese regulation.