It wasn’t our fault but someone should do something about it – the reaction of Japanese policymakers to the turmoil in the world’s financial markets.
Tokyo’s benchmark Nikkei index fell over 11 percent in the past week and the yen is sharply up against the dollar, which hurts the country’s exporters.
Finance Minister Taro Aso would like a coordinated international policy response from the G20 nations.
Meanwhile he lamented: “Drastic fluctuation of share prices is not desirable. We’re seeing rough movement in the market and the government will continue to carefully watch the trend and respond appropriately when necessary.”
But it is unclear what his government, or any government and even Japan’s central bank could do.
Indeed some are accusing Bank of Japan Governor Haruhiko Kuroda of caused the problem with his negative interest rate policy, which was supposed to get the economy growing.
CLSA Japan Securities Researcher Nicholas Smith suggests it might be best if he does nothing: “The Bank of Japan has quite unexpectedly moved to negative interest rates. It looks like it was a great move, it doesn’t seem to be proving that way. So I think that the best thing to do with Kuroda at the moment is buy him a set of flights, a holiday to a beach of his choice and say ‘Don’t come back for a year’.”
The bold move of cutting the benchmark interest rate to below zero was supposed to get the Japanese into the shops again, but it coincided with the perfect storm of super low oil prices, worries about China’s economy and shrinking confidence in the banks and Japanese consumer spending is still falling.