Naoto Kan took less than 24 hours to deliver the “decisive action” he pledged during a fight to remain Japan’s prime minister, selling the yen to stem criticism his response to a slowing economic recovery was inadequate.
Japan’s biggest stock rally in a quarter century has been fueled by earnings growth that is three times faster than the world average, not just speculation Prime Minister Shinzo Abe will end two decades of deflation.
The last time a dispute between Japan and China blew up in 2010 over eight uninhabited islands, the economic fallout lasted less than a month. This time, the spat is prolonging a recession in the world’s third-largest economy.
Bank of Japan policy makers trying to drive investors into riskier assets to fuel economic growth are meeting a new obstacle: a global equity rout that has driven local bonds to a record start to the year versus stocks.