Japan quake: Nerves over stock market re-opening Skip to main content

Japan quake: Nerves over stock market re-opening

Houses are swept by water following a tsunami and earthquake in Natori City The devastation caused by the earthquake and tsunami may lead to an emergency budget

Global Economy

Investors will be watching the Nikkei stock market in Japan when it re-opens on Monday, after it closed down 1.7% after Friday's earthquake and tsunami.
The Bank of Japan will also meet to discuss how to ensure market stability.
Traders will be worried the Nikkei may fall on fears that growth in the world's third-largest economy may slow.
The quake hit just before the exchange closed, so the impact of the disaster was not fully factored in, although Nikkei stock futures did then fall 5%.
There will also be a focus on how other Asian markets react after the devastating events in the north-east of Japan.
Budget calls "Stocks will probably fall on Monday, especially of those companies that have factories in the affected areas, but on the whole the sell-off will likely be short-lived," said Mitsuhsige Akino, a fund manager at Ichiyoshi Investment Management.
Analysts cite the example of the stability of the stock markets in Australia and New Zealand after the recent natural disasters there.

“Start Quote

The earthquake will most likely lead to stronger growth in 2011, rather than weaker”
End Quote Takuji Okubo Societe Generale
"In the medium term, the impact on markets is not likely to be that great," said Arjuna Mahendaran of HSBC Private Bank.
The Bank of Japan will hold a one-day policy meeting on Monday, with one of its priorities being to ensure commercial banks in earthquake-struck regions do not run out of cash in case depositors rush to withdraw money.
The ruling and opposition parties are also reported to have agreed for further emergency financial measures.
"We still don't know the full scale of the damage, but considering what happened after the earthquake in Kobe [in 1995], this will certainly lead the government to compile an emergency budget," said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.
There are concerns over the cost of rebuilding, and the impact it will have on Japan's public finances.
Tax issue? Analysts say the reconstruction expense will have a heavy impact on the government's debt and budget deficit.
Japan already has the highest level of national debt in the industrialised world.
"As the deficit grows, the government may be forced into raising taxes to make up for that," said Mr Mahenderan.
"A raise in taxes could push the economy into recession," he added.
However, despite these concerns, many analysts predict that the rebuilding effort may well help boost economic growth.
"The earthquake will most likely lead to stronger growth in 2011, rather than weaker," said Takuji Okubo of Societe Generale.

http://www.bbc.co.uk/news/business-12710555
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