Chinese trouble ripples through the Tokyo market

catu-japan-station_3418145bTurmoil on the Chinese stock market caused alarm in Japan at the beginning of the week. Finance minister Taro Aso called for a “cool headed response”. Yet as one might expect, given the complex relationship between the two countries, China’s trouble could bring benefits for Japan.

Huge losses on the Chinese stock market prompted share price falls worldwide, including Tokyo. The Nikkei lost 13% before starting to recover. Yet despite that fall, the Nikkei remains 20 percent above its value last year.

Many investors are taking money out of China and putting it into Japan instead, as the yen is seen as a safe haven. Japan’s Finance Minister Taro Aso said a sharp rise in the yen (to 116 against the US dollar, its strongest since February) was “rough” and undesirable for the Japanese economy. The Japanese government has been trying to keep the yen’s value relatively low.

In his excellent piece for the Financial Times, Leo Lewis asserted that although the weaker yen has benefitted the top end of Japan’s export sector, it is much less helpful for small and medium-sized domestic companies, which employ the majority of Japan’s workforce. Those small companies have benefitted from low interest rates and cheap loans. That situation may well continue, as the Chinese stock market crash will deter central banks around the world – including Japan – from raising rates soon, according to the BBC’s Economics Editor Robert Peston.

So, despite signs that Japan could be heading towards another period of recession, its relative stability in comparison to China means it remains attractive to investors and therefore a vital part of the global economy.

This week was quiet on the political and diplomatic front but Japanese newspapers said Shinzo Abe will remain unchallenged as leader of the governing LDP party, thus continuing his premiership despite low popularity ratings.

One job that has changed is that of stationmaster at Kishi. The previous holder of the post, a cat named Tama, died recently, and has been replaced by a female “beauty cat” named Nitama. As well as looking pretty, Nitama appears right for the part, unflustered, calm and willing to serve in uniform. We wish her well for the future!