Opinion

Japan’s place at the top of the stock market may be fleeting

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Japanese Prime Minister Shinzo Abe raising a toast during a state dinner at the Malacanang Presidential Palace in Manila on January 12, 2017. Photo: AFP

William Pesek is a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades”.

Published: 1:30pm, 5 Aug 2018Updated: 8:27pm, 5 Aug 2018

Abenomics just had a great week. That’s the spin from boosters as Tokyo reclaims the mantle of Asia’s stock-market leadership from China.

Japan never quite got over China surpassing its gross domestic product in 2011. China overtaking Japan’s stock market capitalisation in 2014 was yet another blow – one that, at least superficially, has been rectified. By week’s end, Japanese equities were worth US$6.17 trillion to China’s US$6.09 trillion, according to Bloomberg data.

Yet Prime Minister Shinzo Abe should leave the champagne cork in the bottle.

This reversion to the mean, if you will, has more to do with China than anything afoot in Japan. Bourses in Shanghai and Shenzhen are getting clobbered – Shanghai is down by more than 16 per cent this year – while the yuan fell more than 5 per cent versus the dollar. And while China is the direct target of Donald Trump’s trade war, Japan is fast becoming collateral damage.

At the same time, President Xi Jinping and the People’s of Bank of China are curbing financial excesses. The clampdown is reverberating through an economy facing headwinds from the West, hitting share prices.