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Global Drop in Stock Prices

post date : 2015.09.11

Global Drop in Stock Prices

 

Asahi: “The trial of correction relying on easing”

Sankei: “G7 should cooperate to deal with the situation”

Nikkei: “Be on guard for market disturbances from China”

Mainichi: “Global stock market decline highlights problem of depending on credit easing”

Yomiuri: “Prompt efforts should be made to soothe concerns of markets”

 

 

Global stock market turbulence that began with China’s decision to devalue the yuan on August 11 shows no sign of subsiding. Nose-diving Chinese stock markets triggered chain reactions in major markets in American, European and Asian nations. In Tokyo, the average stock price continued to drop, causing the yen to fluctuate widely on the currency market.

 

The global stock market turmoil is thought to have been triggered by investors opting out of investments in stocks and other high-risk products out of fear of an economic slowdown in China and due to speculations that a U.S. interest rate hike is imminent.

 

The Mainichi Shimbun discussed the stock market plunges and their impact on the Japanese economy in its editorial on August 25, while The Asahi Shimbun, The Sankei Shimbun and The Yomiuri Shimbun took up the topic on their editorials on August 26. The Nihon Keizai Shimbun (Nikkei) wrote about it in its August 27 editorial. 

 

■ China’s economic management

The five national dailies each gave an analysis of China’s handling of its economy, the source of the current market uncertainty.

 

The Nikkei pointed out, “It is the tarnished confidence in China’s economic administration that market players are concerned about.” The paper then questioned if the Chinese government is so bound by its own target of 7-percent annual growth that it is difficult to take flexible monetary policies. “The Communist Party leadership, including President Xi Jinping, should not be overly preoccupied with the growth target, which can be said to be a vestige from the planned economy.”

 

The Asahi analyzed China’s rise to become the main player in the global economy as follows: “The country began to play the leading role after it announced a 4 trillion yuan economic stimulus package (between \50 trillion and \60 trillion according to the exchange rates of that time) in the wake of the global financial crisis set off by the collapse of the Lehman Brothers (in 2008). Ironically, however, the huge supply of products generated by this huge investment has created a big gap between supply and demand, which is now haunting the Chinese economy.”

 

The Mainichi gave the following assessment about the sudden drop in share prices in the Chinese market and the devalued yuan: “Share prices had been inflated because of excess liquidity and speculation involving individual investors. No wonder such a situation has been rectified. In a way, however, measures taken jointly by the government and the private sector to raise share prices and the hard-to-reckon [yuan] policy are amplifying investors’ concerns.”

 

The Sankei was also critical: “China’s Xi Jinping administration has implemented blatant measures to prop up stock prices and devalued the yuan. But resorting to this high-handed style to control the markets rather served to highlight how alarmed his administration was.”

 

The Yomiuri has cast doubts on the Chinese government’s handling of the situation. “By pursing a ‘new normal’ policy, which allows the country’s economic growth to slow down, can the Chinese government lead its economy to a soft landing through structural reforms?” the paper said. “A sense of distrust in the Chinese government’s economic management has exacerbated market uneasiness. The administration under Chinese President Xi Jinping needs to face up squarely to the reality that China has become the cause of the global market turmoil.”

 

■ Japanese economic response

Each of the papers also discussed how the global market uncertainty originating from China would impact Japan, and what Japan’s response should be.

 

The Asahi, saying that “Global share prices had been elevated above the strength of the real economy,” stated that with this drop in share prices “It is crucial to respond calmly, without descending into panic.” Regarding its impact on the Japanese economy, the daily argued “It is clear that Abenomics, which relied on high share prices and a weak yen as its driving force, has reached its limit. Before its side-effects become too severe, it will be necessary to reduce quantitative easing and take other measures as soon as possible in order to normalize the economy.”

 

The Mainichi pointed out “The government of Prime Minister Shinzo Abe should take the latest trends as an alarm bell over its ‘Abenomics’ economic policy mix that relies on the Bank of Japan's ultra-easy-money policy.” In order to solve the fundamental problem, the daily proposes “Instead of resorting to such superficial measures, the government should carry out structural reforms and encourage companies to reform their management to increase their profitability.”

 

The Nikkei and The Yomiuri started by saying that “We should not let our guard down...” (Yomiuri) before stating their positions: “There is no need to be excessively pessimistic about the future of the Japanese economy” (Nikkei) and “We should not become too pessimistic about the current situation” (Yomiuri).

 

 The Yomiuri followed by stating that the most important thing was to proceed with implementing the Abe government’s Abenomics economic policy to achieve real growth led by private-sector demand. A growth strategy promoting private-sector activity should be implemented, such as by easing regulations to encourage developing new businesses.”

 

The Nikkei stated that “It is important to accelerate the growth strategy that forms the ‘third arrow’ of the Abe government’s Abenomics economic policy.” The daily argued that it is important to proceed with growth strategies including globalization of Japanese companies, fundamental regulation reforms, and trade negotiations such as the Trans-Pacific Partnership.

 

The Sankei said “There is no need to overreact to market movements, but if the uncertainty continues for too long the global economy will become unstable. As Japan is aiming to revive its economy with low share prices and a weak yen, the country should be on guard for such a situation.” The paper followed by stating that Japan should cooperate with the rest of the G7 and “implement complementary policies to avoid a worsening of the global economy.”

 

*English translations of The Yomiuri and The Mainichi are from The Japan News and The Mainichi, respectively. Those for The Asahi, The Nikkei and The Sankei are provisional. The content of this page was made by the Foreign Press Center Japan and does not reflect the opinion of the Japanese Government or any other organization.

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