Japan targets the stock market

The Nikkei at 13,000 is the new target.

Japan's stock market is on a tear today, apparently due to yet another unconventional economic move from its populist right-wing government. After attacking its central bank's independence, "nationalising" industrial stock and announcing a £70bn stimulus package for the stagnant economy, the country's economic ministry made another shock move over the weekend.

Akira Amrai, Japan's economic minister, said in a speech that:

It will be important to show our mettle and see the Nikkei reach the 13,000 mark by the end of the fiscal year (March 31)… We want to continue taking (new) steps to help stock prices rise.

Before and after… the Nikkei jumped 200 points after Amrai's comments.

The Nikkei at 13,000 would require 17 per cent growth in the next two months, which is ambitious. But now that we've had a change to see how the market reacts to such the move, it's looking very possible indeed.

The government announcing it has a stock market target is largely a self-fulfilling prophecy: stock markets tend to price in future gains, and a government announcing that a certain level is now a matter of policy is as near certain as gains can get. Even if it undershoots, it's still clear that the statement has helped Japanese companies. The biggest direct concern is that such a statement might lead to a dangerous asset bubble, but a Nikkei of 13,000 would, if anything, remain underpriced. So long as the government doesn't get carried away with its success, the move seems to be a smart one.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.