With 2017 upon us, I would like to wish everyone a happy new year and hope for your health and prosperity throughout the year.
Let us first briefly look at the 2016 stock market in hindsight. Right from the start, conditions were harsh, starting off with the turmoil of a six-day losing streak for the first time in post-war Japan.
Market conditions remained volatile thereafter, as well, amidst a series of unanticipated developments as the BOJ adopted NIRP, an earthquake ravaged Kumamoto Prefecture, and the U.K. unexpectedly chose to exit the EU in a referendum.
From July forward, however, some calm returned to the market upon such key events as the BOJ’s decisions to double its ETF buying and to conduct a Comprehensive Assessment of the Monetary Easing. In November, Mr. Trump finished the U.S. presidential race victorious, which resulted in sharp fluctuations for the market. Shortly thereafter, however, US stock markets leveled off as experts deemed the Trump administration’s policies to be market-friendly, giving stock markets around the world a boost and causing the Tokyo market to soar. The market took a firm tone in December on the back of raised interest rates by the FRB and highly positive expectations for the economy under Trumponomics, leading to a dramatic depreciation of the yen with record-breaking climbs in prices and nine days straight of year-end gains—sharply contrasting the losing streak seen at the start of the year.
In effect, 2016 was replete with post-war firsts, record-breaking events, and unexpected or unforeseen developments that truly gave meaning to the old adage for the stock market in Japan that "monkeys and roosters create a stir". Last year was the year of the monkey according to the Chinese zodiac, and the market was definitely agitated.
On the first day of trading last year, I mentioned how Japan’s Corporate Governance Code would be a historic milestone for the management of listed companies. Indeed, we can now affirm that over 80% of the companies listed on the TSE First Section have two or more independent outside directors on their boards.
Under a mindset that sees constructive dialogue between companies and investors as the catalyst for a virtuous circle of sustainable growth and greater medium-to-long term investment returns, I feel that we were able to encourage management at listed companies to exert earnest efforts for improving corporate governance throughout the year.
In a similar note, we here at JPX remain committed to our initiatives as a company, as well. Looking back, we dove into our Second Medium-term Management Plan as of March 2016 and renewed J-GATE in July, significantly improving reliability and processing for OSE’s core derivatives system.
We also developed a new index, the JPX-Nikkei Mid and Small Cap Index, and very much look forward to the launch of this brainchild of the JPX-Nikkei 400. Geared toward showcasing exemplary SMEs, this new index is poised to be truly groundbreaking.
In a similar vein, JPX has and will continue to be involved in a number of initiatives with fintech. There are ongoing plans to double participation in system prototype testing as we see what sort of innovation can be unleashed through the application of new technologies to Japanese financial markets.
Finally, I would like to touch on what we can expect for the market in 2017. As I mentioned at the start of my address, one of the adages among those in the industry in Japan says that monkeys and roosters create a stir. As such, we can also expect this year, the year of the rooster, to come with a stir. We are all hoping for a good stir this year. President-elect Trump will be inaugurated on January 20; the U.K. will commence the formal Brexit negotiation process in March; and, elections will be held in the Netherlands, France, and Germany.
We must also keep a watchful eye on affairs in South Korea and China. Here at home in Japan, we can safely say that, at the moment, we are the most politically and economically stable nation in the world.
Though circumstances do not allow us to be unwaveringly optimistic, I do believe that wheels have been set in motion to part with deflation and generate growth, given that 2016 closed with crude oil prices peaking and the yen on a weak trajectory.
Thus, after nearly a year-long correction phase for the market, this year will become a pivotal year in the revamping of Abemomics. Let us keep our hopes high for 2017.
In closing, I would like to express JPX’s sincere appreciation for your gracious support last year. Moving forward, we humbly ask for your continued guidance and cooperation. We offer you our best wishes for 2017.
Akira Kiyota
Director & Representative Executive Officer, Group CEO
Japan Exchange Group, Inc.
