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204473
Wed, 08/31/2011 - 00:02
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https://oananews.org//node/204473
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FOCUS: Markets hopeful of Noda's fiscal rehab but cautious of early tax hike
TOKYO, Aug. 30 Kyodo -
While market players and analysts have welcomed incoming Prime Minister Yoshihiko Noda's positive attitude toward restoring the nation's fiscal health over the long term, they remain cautious that an early tax hike could have a negative impact on the economy in the short term.
Many are hopeful that Noda, who served as finance minister in the Cabinet of outgoing Prime Minister Naoto Kan, will concentrate on putting an end to political instability and accelerating the implementation of policies to reconstruct the Japanese economy.
Daisuke Uno, chief strategist of the Treasury Marketing Department at Sumitomo Mitsui Banking Corp, said that Noda's views on fiscal rehabilitation are ''at least not an adverse element,'' given persistent uncertainties over the outlook for the Japanese and global economies.
''It is necessary to increase taxes'' for fiscal rehabilitation to move the economy forward, Uno said.
But market players are also concerned about the timing of any tax hike as if it is implemented before the Japanese economy achieves sustainable growth, it would be a heavy blow to taxpayers.
''It is encouraging that Noda, who seems well-versed on the fiscal problems in the United States and Europe, said he will put weight on fiscal rehabilitation,'' said Makoto Noji, senior bond and currency strategist at SMBC Nikko Securities Inc.
''But for now, it is hoped that Noda will concentrate on unifying his party and cooperating with the opposition'' to promote efforts to reconstruct Japan following the March 11 earthquake and tsunami, Noji said.
The political uncertainty stemming from the ruling Democratic Party of Japan's internal divisions and the divided Diet, which worsened under Kan's leadership, has hampered the implementation of key policies to revitalize the economy.
Satoru Ogasawara, vice president of economic research at Credit Suisse, said financial markets would be stable ''if Noda can pave the way for rebuilding the economy'' by establishing close ties with opposition parties.
The political instability led Moody's Investors Service Inc. recently to lower its credit rating for Japanese government bonds by one notch.
''Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies,'' it said.
The new prime minister faces a number of urgent tasks, including reconstructing areas affected by the March disaster and dealing with the adverse impact on Japanese exporters of the strong yen, which has appreciated amid fears over possible economic slowdowns in the United States and Europe.
Following Noda's victory in the DPJ's leadership election on Monday, the 225-issue Nikkei Stock Average and the broader Topix index of all First Section issues on the Tokyo Stock Exchange lost ground slightly on concern over a tax hike but many analysts say the reaction was only temporary.
Tokyo stocks were supported Tuesday on expectations for Noda's new Cabinet, which is expected to be formed later this week, as well as for his policies, said Hiroichi Nishi, equity division manager at SMBC Nikko Securities.
The currency market's reaction has been limited so far, but market participants are closely watching what steps Noda's government will take to stem the yen's rise, dealers said.
''There are hopes that Noda will be able to launch his government smoothly,'' said Yumi Nishimura, senior market analyst at Daiwa Securities Co.
Market players are also pinning their hopes on Noda's ability to cooperate with the opposition camp after he said he would abide by an agreement that the DPJ struck earlier this month with the two main opposition parties to review a number of the ruling party's major policies.
Nishimura said financial markets will react positively if Noda is able to ''come up with concrete measures regarding a growth strategy for the Japanese economy, such as whether Japan will join the U.S.-led trans-Pacific free trade agreement,'' a decision Japan has postponed following the March disaster.
While market players and analysts have welcomed incoming Prime Minister Yoshihiko Noda's positive attitude toward restoring the nation's fiscal health over the long term, they remain cautious that an early tax hike could have a negative impact on the economy in the short term.
Many are hopeful that Noda, who served as finance minister in the Cabinet of outgoing Prime Minister Naoto Kan, will concentrate on putting an end to political instability and accelerating the implementation of policies to reconstruct the Japanese economy.
Daisuke Uno, chief strategist of the Treasury Marketing Department at Sumitomo Mitsui Banking Corp, said that Noda's views on fiscal rehabilitation are ''at least not an adverse element,'' given persistent uncertainties over the outlook for the Japanese and global economies.
''It is necessary to increase taxes'' for fiscal rehabilitation to move the economy forward, Uno said.
But market players are also concerned about the timing of any tax hike as if it is implemented before the Japanese economy achieves sustainable growth, it would be a heavy blow to taxpayers.
''It is encouraging that Noda, who seems well-versed on the fiscal problems in the United States and Europe, said he will put weight on fiscal rehabilitation,'' said Makoto Noji, senior bond and currency strategist at SMBC Nikko Securities Inc.
''But for now, it is hoped that Noda will concentrate on unifying his party and cooperating with the opposition'' to promote efforts to reconstruct Japan following the March 11 earthquake and tsunami, Noji said.
The political uncertainty stemming from the ruling Democratic Party of Japan's internal divisions and the divided Diet, which worsened under Kan's leadership, has hampered the implementation of key policies to revitalize the economy.
Satoru Ogasawara, vice president of economic research at Credit Suisse, said financial markets would be stable ''if Noda can pave the way for rebuilding the economy'' by establishing close ties with opposition parties.
The political instability led Moody's Investors Service Inc. recently to lower its credit rating for Japanese government bonds by one notch.
''Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies,'' it said.
The new prime minister faces a number of urgent tasks, including reconstructing areas affected by the March disaster and dealing with the adverse impact on Japanese exporters of the strong yen, which has appreciated amid fears over possible economic slowdowns in the United States and Europe.
Following Noda's victory in the DPJ's leadership election on Monday, the 225-issue Nikkei Stock Average and the broader Topix index of all First Section issues on the Tokyo Stock Exchange lost ground slightly on concern over a tax hike but many analysts say the reaction was only temporary.
Tokyo stocks were supported Tuesday on expectations for Noda's new Cabinet, which is expected to be formed later this week, as well as for his policies, said Hiroichi Nishi, equity division manager at SMBC Nikko Securities.
The currency market's reaction has been limited so far, but market participants are closely watching what steps Noda's government will take to stem the yen's rise, dealers said.
''There are hopes that Noda will be able to launch his government smoothly,'' said Yumi Nishimura, senior market analyst at Daiwa Securities Co.
Market players are also pinning their hopes on Noda's ability to cooperate with the opposition camp after he said he would abide by an agreement that the DPJ struck earlier this month with the two main opposition parties to review a number of the ruling party's major policies.
Nishimura said financial markets will react positively if Noda is able to ''come up with concrete measures regarding a growth strategy for the Japanese economy, such as whether Japan will join the U.S.-led trans-Pacific free trade agreement,'' a decision Japan has postponed following the March disaster.
