Abenomics First Arrow Still Driving Stocks

The Japan market has rallied — nearly doubling since the beginning of 2013 and up nearly 17 percent so far this year — despite doubts over whether Abenomics, or Prime Minister Shinzo Abe’s plan to kick start Japan’s economy out of its decades-long deflationary slump, would see any success.

Much of the rally had been driven by the first “arrow” of Abenomics — a massive quantitative easing program from the Bank of Japan, which sent the yen sharply lower and boosted interest in stocks. The “second arrow” was meant to be fiscal stimulus. Some analysts had grown weary of waiting for promised structural reforms, dubbed the “third arrow” of Abenomics, but there are some sign those are taking flight.

“Structural reforms are difficult to implement and they take even longer to come into fruition, to show the results. But the third arrow has been fired,” Lim Say Boon, chief investment officer at DBS Wealth Management, said at a presentation to clients last week. “We’ve seen the blueprints for corporate tax cuts, agricultural liberalization, deregulation of a whole range of areas: energy, environment, health care. We have seen a new corporate governance code and we have seen plans for tax incentives to raise female participation in the work force.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza