Japan’s stock exchange is been experiencing tumultuous times amid global uncertainties, economic slowdown, and its own contracting economy. With its own economy struggling to keep the neck above water, here are some of the top factors that impact Japan’s Nikkie after US-china trade talks.
Yield Curve Inverted- Fears of Recession grip the US
On March 22, 2019, the 10 years as well as the 3 months treasury yields inverted for the first time since 2007. As reported by Reuters, the 10 year yield stooped lower than 2.4% for the first time post-December 2017. The yield curve inversion is perceived as a sign of recession by leading economists. According to Bianco Research, a recession has followed every time in the past 50 years, whenever the yield curve inverted, they mentioned in a tweet.
Banks and insurers in Japan sold off their investments in US bonds sharply on March 25, 2019, on the fears of a recession. According to the Eiji Kinouchi, chief technical analyst, Daiwa securities, “Insurers react negatively as it becomes harder for them to manage assets”
US-China Trade Talks
The US-China trade talks would be resuming on March 28, 2019. Robert Lighthizer, a top negotiator for President Donald Trump along with Steven Mnuchin, the Treasury Secretary would be visiting Beijing for a 2 day meet. From China, the top negotiator Vice Premier Liu He would be visiting the US in the first week of April 2019, as reported in Bloomberg.
While both the nations want to avoid escalating the trade tensions, US President Donald Trump may be desperate to sign and seal the deal, owing to elections back home in 2020. Clark Packard, the Trade Policy Counsel at the R Street Institute says the President certainly is desperate for a deal.
Complete rollback of tariffs may be an unlikely scenario as President Donald Trump has already clarified his stand, saying that China needs to comply with the deal, something which so far Beijing has not committed to.
Investors remain cautious and wait for the outcome of the trade talks. Over the years, Japan has expanded its business into China either for manufacturing and assembling for US shipment and therefore, Japan, as well as its investors, would be directly affected by the outcome of the trade meeting between the US and China.
There is no doubt that the global economies including the US and the European economies are showing signs of slowing down. Given that Japan’s own economy is struggling, it needs to be seen as to how the global factor or US-China trade talks would impact Nikkie!