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December 31, 2016

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Nikkei ends volatile 2016 at highest in 2 decades

TOKYO’S benchmark stock index ended a volatile 2016 on a down note yesterday, but still hit the highest year-end close in two decades on optimism over the incoming US government.

US President-elect Donald Trump’s surprise election victory last month has sparked a rally in global equity markets and pushed the dollar higher on expectations of big government spending and a rise in interest rates.

“Trump was a game changer,” said Hisao Matsuura, chief strategist at Nomura Securities.

Matsuura said that early this year investors had grown weary of accommodative central bank monetary policies while recognizing that their effectiveness was waning.

“So the fiscal stimulus from the US, even if it’s not happening now, is positive news,” he said. “The market is changing from monetary to fiscal policies.”

Japan’s Nikkei 225 index rose 0.4 percent in 2016 to close at 19,114.37 points, marking the fifth consecutive annual increase and highest year-end finish since 1996 when it ended at 19,361.35.

Yesterday, however, it lost 0.16 percent, or 30.77 points, taking its downward lead from the US overnight.

The broader Topix index of all first-section shares was unable to keep pace this year, losing 1.85 percent to 1,518.61, snapping four years of gains.

It managed to edge up 0.01 percent, or 0.22 points yesterday.

The Nikkei fell below the psychologically important 15,000 mark in late June after Britain’s vote to exit the European Union pummeled world markets, while a strong yen hit Japanese exporters.

But the index regained vigor since Trump was elected as dealers bet his plans for big spending and tax cuts will fan inflation and force the Federal Reserve to aggressively hike interest rates — sending the dollar soaring against the yen.

A weaker yen is generally good for profits for Japanese companies doing business abroad, stoking demand for their shares.

Analysts were generally upbeat on the prospects for Japanese equities in 2016.

“We expect the Nikkei to go beyond 21,000 points in 2017,” said Kazuhiro Takahashi, equity senior strategist at Daiwa Securities.


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