Economic tensions with the United States, in particular, have increased over the past several months, as Japan's trade and current account surpluses have soared. Coupled with these trade perturbations, the swings in the yen-dollar exchange rate registered this year have dampened foreign enthusiasm for investing in Japanese stocks. They also have upset the business calculations of Japanese exporters. A weaker yen is good for sales abroad, but if it becomes too weak, then the prices of vital imports soar and trade frictions heat up. Policymakers in Tokyo have grown increasingly concerned about the economy's performance and the mood of stock investors.
Top officials continue to insist that the surge in the external surplus is temporary.
They also maintain publicly that the recovery is still on track. This contrary activity has helped brake or cushion past declines, but most often it has been insufficient to boost the market to a desired level. With the official discount rate at rock bottom and fiscal austerity in full force, the government has few levers with which to support stock prices, a bind recognized by equity traders and investors. This change is aimed at allowing the securities industry to help promising start-ups raise equity capital. Experts predict, however, that this highly risky market will develop only slowly.