Nikkei shoots back above 20,000
JAPANESE stock prices jumped 7.84 per cent yesterday, shooting the Nikkei 225 average past the 20,000 mark, as investors bid up telecommunications and steel shares likely to benefit from a government package of economic stimulus measures.
The Nikkei surged 1,471.2 points to 20,229.12, its highest closing level since October 25.
Yesterday's rise marks the fourth-largest gain for the Nikkei in percentage terms, behind the 9.3 per cent jump on October 21, 1987.
The broader Topix index of all stocks on the first section of the exchange gained 101.4 points or 6.64 per cent to 1,629.22.
''It's a dramatic statement of confidence that over the next quarter, we'll see some real growth,'' said Robert Owen, manager of international sales at Schroder Securities.
Investors were cheered by weekend news that parliament had approved a compromise version of four political reform bills, clearing the way for the mid-week announcement of a economic spending package.
''It's just about as bullish today as you can get,'' said Chuck Lambert, a senior salesman at Jardine Fleming Securities.
Investors were also cheered by a Nikkei English News report in the afternoon which said Prime Minister Morihiro Hosokawa wanted to make a decision on tax reform, including income tax cuts, tomorrow; decide on an economic stimulus package by Thursday and prepare a draft of the budget by February 10.
An economic package is good news for corporate Japan, which has been urging the Government to move quickly to lift the economy.
However, 20 economists surveyed by Bloomberg Business News said Japan's economy would shrink this year even if the fiscal package was put in place.
''All along we assumed the fiscal package would be coming. That fact that it was delayed by a couple weeks isn't going to materially impact the effect of it,'' said Don Kimball, an economist at Mitsubishi Bank.
The economists' views were in direct conflict with the Economic Planning Agency (EPA) where an official said yesterday it was setting economic growth target at two to 2.5 per cent for the 1994-95 fiscal year starting on April 1.
A senior EPA official said: ''The EPA thinks it is appropriate for Government agencies to set the growth forecast at two to 2.5 per cent''.