Japanese Stock Market 2006 – A Review

The Japanese Stock Market is one of the most interesting and promising of international stock markets to watch. This article reviews the performance and overall condition in the Japanese Stock Market 2006.

The economy in Japan during the year 2006 was booming. Shops had stocked luxury goods and the buyers who were eager to purchase them. Restaurants were full of diners. People had begun to loosen their purse strings. The economy was driven increasingly by domestic consumption and not just by exports as has been the trend in Japan. Japan can no longer be called an emerging economy and this was very evident during this year.

It was surprising to note that the share market fell by around 20 % in September of 2006 from its peak in April. This fall of 20% coincided with increasing concerns about inflation, interest rates and low growth in the west. It is surprising because the Japanese economy is decoupled from exports. As a matter of fact the Japanese economy stands at a situation where only 12 % of its GDP depends on exports.

The fall in September 2006 at around 20% could be on account of the fact that although economic linkages with the west have largely been removed linkages based on sentiment still remain. As we all know sentiment and fundamentals both play a very major role in any Share Market. It is quite possible that eventually the Japanese Share Market will evolve into a more rational one.

The signs point to that. The economy in 2006 was booming and still is. The year 2006 was a great time to invest in Japanese Stock As the situation stands currently Japanese stocks will promise good returns in the future.

Of course, as is with any International Stock Exchange and the stock market in general, there were ups and downs and these were not just in terms of share market indices.

In November 2005 a newly developed computer system developed bugs. This system was installed for handling transaction closing. In November the non performance of the system resulted in a blockage of trading on the floor for a full 90 minutes. In December a botched transaction resulted in a loss of 347 million USD. As a result Yasuo Tobiyama of the Tokyo Stock Exchange had to resign.

The first quarter of 2006 as a result was largely spent on undoing the damage caused as a consequence of the computer bugs during the last quarter of 2005.

The market picked up inspite of glitches and corrected itself. Nikkei peaked during April of 2006. It inexplicably fell by 20% by September of 2006.

In a nutshell the times are indicative of good growth and stability in the Japanese stock Market 2006. The year 2006 is definitely indicative of the fact that Japan is growing into a mature market.