Japanese stocks have had a good run so far this year. But whether the good times continue–both for stocks and bonds–depends critically on whether the faction-riven Democratic Party of Japan (DPJ), under the embattled leadership of Prime Minister Noda Yoshihiko, comes up with a credible (and eventually passable) consumption tax increase bill as scheduled this week.
If not, the bearish scenario is that Japan’s bond market will continue heading down, and pull stocks with it. This scenario has been given a name: “Ozawa shock.”
Since hitting a low of 8,160 last November 11, the Nikkei 225 Index is up a whopping 23%. But last Friday’s 10,011 close was off 115 yen (1.14%) from the day before, the second biggest drop of the year.
Read the rest of the story: Whither Japan Stocks and Bonds: This Week’s Tax Debate Could Move Markets.