Optimism is spreading rapidly throughout the Tokyo stock market. With the key Nikkei average having reclaimed 11,000, a level unseen for months, market players believe they have, for now, established the downside of the market.
There are two key reasons for the latest developments. The first is the narrowing gap in perspective between the market and the government. Specifically, the market previously did not fully trust the government's approach to tackling the nation's economic and financial woes.
The government had originally maintained that giving banks an additional injection of public funds was unnecessary, brushing aside the market's view that banks will need more public cash to cover capital shortages that are expected to mount as the assessment of bad loans under tougher criteria force them to sharply build up their loan-loss reserves.
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