Japan's Amari: small equities bubble manageable, signals corporate growth

TOKYO (Reuters) - Japanese Economics Minister Akira Amari said on Friday if recent stock market gains are signs of a small bubble he would welcome this as it’s still manageable and signals growth in business activity.

Japan's Economics Minister Akira Amari speaks during a Thomson Reuters Newsmaker event in Tokyo July 11, 2014. REUTERS/Toru Hanai

Amari, who spoke after the Nikkei stock average briefly hit a 15-year high, said the rise reflects expectations that corporate earnings will improve further and noted that the government needs to put policies in place to ensure this happens.

It is unusual for a policymaker to speak approvingly of an asset price bubble as the danger of it popping and wreaking economic havoc is well documented.

However, Japanese Prime Minister Shinzo Abe’s government has placed a lot of emphasis on lifting stock prices to increase returns for individual investors in the hope that they spend some of this money and revive the economy.

“The larger a bubble becomes, the harder it is to control,” Amari told reporters.

“A small bubble is something that can be contained. If recent stock gains are signs of a mini-bubble, this is something I would welcome.”

Japan’s Nikkei share average briefly rose above 20,000 for the first time in 15 years earlier on Friday, supported by a positive tone in global equity markets, but the benchmark index quickly erased those gains to trade slightly lower.[.T]

Japanese shares have been steadily rising since late last year despite a largely mixed bag of economic data, causing some investors and analysts to question the sustainability of these gains.

Since coming to power in December 2012, Prime Minister Shinzo Abe has pursued a mix of economic reforms and aggressive monetary easing to revitalize growth and pull the economy out of 15 years of grinding deflation.

Abe’s government has said that households and corporations have been hoarding cash for too long and they need to be encouraged to invest in riskier assets, like stocks.

However, Abe’s critics say the prime minister is trying to recreate Japan’s late 80s bubble economy and that stock market gains only benefit wealthy individual investors.

Editing by Chris Gallagher & Shri Navaratnam