The Riceman cometh.
It looks like the Trans-Pacific Partnership (TPP) was able to do what Abenomics just couldn’t. Japan’s hard stance protecting its domestic rice industry at the top-level U.S.-Japan TPP talks was one of the factors that caused the Nikkei 225 Stock Average to do something it hasn’t done in 15 years.
On Wednesday, the Tokyo benchmark surged above the psychologically important 20,000 mark for the first time since April 2000.
Expectations of strong Japanese corporate earnings and a weak yen were even bigger factors in the Nikkei’s long-delayed return. But the economic hopes raised by the pending trade deal clearly helped.
While nothing concrete was settled, Japanese investors obviously view as positive the likelihood of Japan and the U.S. settling differences over the automotive trade and import quotas for rice. The talks between the two biggest economies at the 12-member TPP negotiating table lasted 18 hours, concluding early Tuesday morning. But reports say “significant” progress is being made.
Japan has refused to lower tariffs on imported rice, while the U.S. is demanding tariff-free access for 175,000 tons of U.S. rice. They are currently discussing a potential import quota.
And to give Abenomics its due, the Nikkei was below 10,000 when Japanese Prime Minister Abe came to power. In 2013, the index rocketed 57% on proposed reforms and growth plans. The prime minister is hoping the TPP will give him the momentum to push through reforms to the protected agricultural sector, which he said would stimulate growth at home.
The TPP is a cornerstone of the Obama administration’s trade global agenda. The partnership aims to promote trade, investment, growth and innovation among its 12 Pacific Rim members, while creating and retaining jobs.