Japan's Stock Price Is "Abnormal"

Nikkei index hit the bottom lower than 7000 yen, the price in 1982. Carlos Ghosn, the CEO of Nissan, commented it was "abnormal in every respect". Nissan's stock price is lower than that in 1999, when Nissan was about to bankrupt.
One reason is the fire sales of hedge funds that are pressed to clear position to refund customers. Another is the abnormal appreciation of yen. But it's strange because Japan's trade surplus deteriorated so that it recorded the first deficit since 1982.

FT.com attributes it to the rewinding of yen-carry trades, that borrow low-interest yen and buy high-interest assets in dollar and euro. The scale of carry trades is uncertain, but Gold Research estimates it as 1.2 trillion dollar. Such huge arbitration made yen abnormally cheaper and subsidized export industries. Now the fortune is reversed.

Its reason is obvious: the zero-interest rate policy of the Bank of Japan that lasted almost seven years until 2006. It should be ended in 2003, when the economy recovered, but some economists and politicians wanted BoJ to continue "reflation". As a result, the money contributed to the subprime bubble.

Now Japan is revenged by its silly monetary policy. It teaches us that "unorthodox" monetary policy has its unpredictable risks and that there are few policy measures for single government to counteract the tsunami of global financial crisis.