(Bloomberg) -- Japan’s government and central bank sought to show a united front and restore calm to financial markets, after the biggest stocks plunge in more than three decades triggered criticism of monetary policy tightening and cast a shadow over efforts to get households to invest their assets.
“It’s important to make calm judgments in a situation like this,” Prime Minister Fumio Kishida told reporters during a visit Tuesday to Hiroshima. “I want to continue to watch the situation with a sense of urgency while closely cooperating with the Bank of Japan.”
Officials appeared to be doing their best to verbally reassure onlookers after the Nikkei 225 share average had the biggest percentage fall since the so-called Black Monday tumble in 1987, while the yen shot up to beyond 142 to the dollar. With some pointing fingers at the central bank’s decision to hike rates last week as part of the trigger for the market turmoil seen in the last few days, the government appears to be trying to show it’s standing with the BOJ remains unchanged.
Following the first three-way meeting among the BOJ, Finance Ministry and Financial Services Agency since March, currency chief Atsushi Mimura said the joint statement between the government and the BOJ wasn’t even discussed. He added their view of the economy’s recovery path remains unchanged.
That three-way meeting is often used to send signals to the market. In this case the message appeared to be that authorities are watching developments closely and basic economic fundamentals are still solid.
Mimura also noted some market observers attribute the recent market volatility to a sudden global risk aversion triggered by concerns about a slowdown in overseas economies and heightened geopolitical tensions, including in the Middle East.
“Financial markets move on a variety of factors, as a government we can’t definitively say what moved it,” he said.
Meanwhile, Finance Minister Shunichi Suzuki also spoke to reporters following the market close on Monday. He tried to reassure new investors who had started putting money into the government’s tax-free investment program this year.
Still, the government and the BOJ will likely continue to face close scrutiny. Kishida’s cabinet’s support rate remains around 30% according to recent polls, while the premier also faces the prospect of a party leadership election in September.
Governor Kazuo Ueda will be called to a parliamentary committee meeting either this week or early next week to be questioned about the BOJ’s latest policy decision, according to opposition party senior member Jun Azumi. The opposition party came to an agreement with the ruling party on Ueda’s appearance, he told reporters Tuesday.
“There’s no doubt that the BOJ’s rate hike has become a turning point for Japan’s monetary policy, and has led to impact on stocks and currencies,” he said.
--With assistance from Isabel Reynolds.
(Updates with more comments from other senior officials, context)
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