US Stock Markets Supported by the Internationalization of Easing and Firms

The mirror of the U.S. economy, the Dow Jones Industrial, has hit its highest point in five years and five months. The U.S. is showing the world that it is recovering faster than any other industrialized nation from the “once-in-a-century” financial crisis.

Although the Federal Reserve’s monetary easing has helped greatly, it was the revitalization of the stock market that stimulated investments and consumption and opened up the path to recovery. This is also the case for the Japanese economy. For Japan, where Prime Minister Shinzo Abe touts an escape from deflation, the new high reached by the U.S. stock market represents something big.

The Federal Reserve announced the third round of quantitative easing last September. Since then, Chairman Bernanke and the Board of Governors have repeatedly hinted at the importance of continuity and long-term relief. Due to the Federal Reserve’s consistent stance, there have been increased purchases of risky assets with high returns.

Signs of recovery and strengthening in the housing market, where a portion of the relief funds went, are a factor in the increasing optimism toward the U.S. economy.

It cannot be overlooked that U.S. firms have improved earning strength and attracted the money that flooded in with monetary easing.

After monetary easing, emerging economies such as China have expanded after bottoming out [in the crisis]. It was American firms that reacted to high growth in emerging countries, and actively promoted globalization.

In America, it is not rare for large firms to have foreign sales account for more than half of their total sales. By harnessing global economic growth, the top 500 American firms’ net profit grew by 6 percent between October and December of 2012. This is a big increase in momentum, after having crawled along between July and September of last year.

The Italian political situation became quite messy in Europe, and in the U.S. automatic budget cuts on annual expenditures came into effect. While it is unclear how politics will influence the economy, firms hold the key to sustaining the activity in the U.S. stock markets and increasing both investments and employment.

The next governor and vice-governor of the Bank of Japan have indicated their intention to strengthen quantitative easing. The use of relief funds to stabilize markets is growing internationally.

Japanese firms must change in order to reliably usher in a flow of funds to the stock market. They must not only cut costs, but also utilize the abundant capital at hand and expand revenue sources globally through investments, mergers and acquisition.