Japanese stock index closes at 6-year high; jumps 57% in 2013

Tokyo Stock Exchange's bench mark index Nikkei 225 ended the year yesterday soaring 57 per cent in 2013 over the previous year, reaching its highest level in 6 years. 

Scoring the biggest annual gain in over four decades the index closed at 16291, 112 points up or 0.69 per cent over Friday's closing.

In comparison, the US benchmark index Dow Jones surged 26 per cent and London's FTSE 100 index rose 14 per cent during the year, with one trading session left.

The broader Topix index of all first-section issues on TSE closed at a high of 1302, the highest closing since July 2008, registering a 54 per cent growth over the year.

The impressive growth of the Japanese stock market was fueled by the government's aggressive economic stimulus measures and monetary policies.

The world's third-largest economy has picking up after years of stagnation as prime minister Shinzo Abe took the reins in late 2012 and initiated radical changes in fiscal policies. The newly-appointed central bank chief Haruhiko Kuroda resorted to quantitative easing and other measures to stimulate economic growth in the sluggish economy.

Yen's value against the US dollar weakened around 22 per cent during the year to close at 105 yesterday, the highest level since September 2008.

On the back of a weaker yen, Japan's exports have started picking up and Japanese giants such as Sony and Panasonic are retuning to profit after years of heavy losses. A weaker currency increases exporters' competitiveness and boosts their dollar earnings when repatriated.

The yen's weakness brought in higher inflation, which was another thrust area of Abe's economy policy. The economy which has been suffering from chronic deflation has gradually moved out of the spiral and is inching towards the central bank's 2-per cent target. The November inflation was 1.5 per cent.

In a speech earlier this month, Kuroda said, "For the Japanese economy, now is a golden opportunity to break away from deflation, as signs of a favourable turn are being widely observed in the real economy, in the financial market and in people's minds and expectations. The Bank of Japan promises to achieve the price stability target of 2 per cent as early as possible."

Last week, Japan unveiled a record $921 billion draft budget for next fiscal year with increased spending on social security, public works and defence. (See: Japan unveils record 2014 budget)

The government's latest forecast envisages a 2.6- per cent real GDP growth in the current fiscal which will slow down to 1.4 per cent in the next fiscal as a new sales tax regime comes into force.

Although, recent surveys show 3.4 per cent and 4.4 per cent growth in the next two quarters, analysts doubt whether the pace is sustainable in the subsequent quarters increasing the sales tax from 5 per cent to 8 per cent in April which will have a negative impact on consumer spending.

According to finance ministry data, the country's public debt burden at the end of June has crossed a whopping ¥1 quadrillion ($10.5 trillion) and is projected to hit 230 per cent of GDP by 2014, the highest compared to any other developed nation.