Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Volatility Takes Over the Nikkei

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Market fears walloped Japanese stocks on Thursday, taking down the Nikkei (NIKKEIINDICES: ^NI225  ) again as part of a bear run over the past month. Despite that, however, the Nikkei managed to stave off a more serious weeklong loss, shedding just 1.5% over the past five days as a nearly 2% gain on Friday eased investor pain. The index has crashed over the past month, but should you be concerned about the state of Japan's markets? Let's take a look at what's happening across the Pacific.

A case of the jitters
If you want a comparison of why Japan's Nikkei has risen and fallen so dramatically over the past few months, look no further than America's leading stock indexes. The S&P 500 (SNPINDEX: ^GSPC  ) has swung wildly over the recent month as investors have torn their hair out over quantitative easing. Will Fed Chairman Ben Bernanke taper off bond buying? Will stimulus continue at its current pace? Even though the economy is still far away from a complete recovery and quantitative easing looks to continue for some time -- tapering or no -- investors have sent the markets flying up and down over the slightest bit of news. That's volatility in a nutshell, and it ignores any semblance of a rational long-term outlook as Wall Street has grasped the smallest tidbits of news and ran with them.

Translate that to Japan's markets, where Prime Minister Shinzo Abe is launching the mother of all quantitative easing movements that aims to double the country's monetary supply and boost inflation to 2% after two decades of stagnancy. It's volatility on steroids.

There are reasons to be wary of Japan's rise, certainly. Any rise from interest rates could make the country's substantial public debt all the harder to service. Strengthening from the yen will also hammer leading export stocks that look to rely on a weak currency to boost profit.

Nonetheless, Japan's stimulus isn't a short-term blast that should frighten investors like it has. It's a long-term movement to restore a health economic climate the country, and the small nuances of an unpredictable market are no reason to panic. The Nikkei's early year gains probably won't be back at that level, but if "Abe-nomics" continues successfully and further weakens the yen while growing the money supply, Japan's stocks should thrive.

Japan's leading financial firms haven't abandoned the stimulus ship just yet, at least. Nomura Holdings (NYSE: NMR  ) broke ranks from the irrational panic when it raised its target for the Nikkei to 18,000 by the end of the year. That represents a sharp gain for the index, which currently sits at just above 12,600. That'd help out Nomura as well, which has targeted a number of leading Japanese firms as buys that stand to benefit from Tokyo's growth-oriented moves. Nomura's own asset management branch posted a 16% year-over-year revenue gain last year, and a strong rebound from the Nikkei would help the company move even higher this year.

Many banks aren't so optimistic about how Japan's stimulus will impact their finances, however. Sumitomo Mitsui (NYSE: SMFG  ) , Japan's third-largest bank, projected in May that its net income will fall by 27% this year, a sharp fall after last year posting a 53% gain in net profit. With interest rates low, lending looks to become less profitable at the country's leading financial firms. Sumitomo has also reduced its exposure to bonds while moving money into stocks and similar assets, a plan that began last year and likely will pay off for Sumitomo in the future.

Not all banks are downbeat on bonds, however. Mitsubishi UFJ Financial (NYSE: MTU  ) has the country's largest portfolio of government bonds, holding more than 48 trillion yen's worth, and has indicated that it's not looking to spark a sell-off in bonds anytime soon. Like Sumitomo, however, Mitsubishi UFJ isn't optimistic about this year's forecast: The company projects its net profit will fall 11% this year after slipping 13% last year.

Are global economies on the verge of a comeback?

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery" outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2491084, ~/Articles/ArticleHandler.aspx, 9/28/2016 6:39:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:45 PM
^GSPC $2159.93 Up +13.83 +0.64%
S&P 500 INDEX CAPS Rating: No stars
^NI225 $16465.40 Down -218.53 -1.31%
Nikkei 225 CAPS Rating: No stars
MTU $5.22 Down -0.07 -1.32%
Mitsubishi UFJ Fin… CAPS Rating: **
NMR $4.48 Down -0.05 -1.10%
Nomura Holdings CAPS Rating: ***
SMFG $6.86 Down -0.15 -2.14%
Sumitomo Mitsui Fi… CAPS Rating: No stars