Japan economics minister frets oil producer countries will sell assets
TOKYO: Japan’s economics minister on Tuesday expressed concern that oil producer countries could start selling assets to offset declining revenue from crude exports and this could dent Japanese stocks further.
Akira Amari’s comments come amid growing worries that a free fall in oil prices is a sign that excess supply is chasing dwindling global demand as China’s economy slows.
Some economists say the collapse in oil prices and China’s economic woes could cause major shifts in portfolio flows on a global scale, and policymakers could struggle to contain the impact on already fragile financial markets.
“Japanese stocks probably make up a good portion of financial assets that oil producing countries would try to sell,” Amari said on Tuesday.
“If oil prices fall too far, this could have a negative impact on Japan.” In the past 18 months oil has fallen over 70 percent.
Since the start of this year global stocks have been sold off as a result, and Japanese stocks closed at their lowest level in a year on Monday. Japan’s economic fundamentals remain strong and stocks declines are due to external factors, Amari said.
Initially, policymakers in Japan and major energy consumers said the fall in oil futures is a boon for economic activity because gasoline and fuel become cheaper.
However, this optimism has faded due to concerns that falling oil prices is a signal that the global economy is weakening, which could cause large shifts in asset allocation.