Japanese Stocks Extend Gain From 30-Year High on Post-Suga Hopes
(Bloomberg) -- Japanese equities rose, with the Topix extending gains to a more than 30-year high, on optimism for new economic policies following the announcement that Prime Minister Yoshihide Suga will step down.
Electronics makers gave the biggest boost to the Topix, which advanced 1.3% to the highest level since August 1990. Telcos jumped as investors hoped that the next prime minister will have more favorable policies on mobile phone bills. Fast Retailing Co. and Tokyo Electron Ltd. were the largest contributors to a 1.8% gain in the Nikkei 225 Stock Average.
Animal spirits among Japan stock traders have been rekindled after Friday’s news of the resignation of Suga, who has slumped in the polls amid perceptions of the government’s mishandling of the pandemic. Taro Kono, the country’s vaccine czar, has emerged as the leading candidate to replace Suga as head of the ruling Liberal Democratic Party, a position that virtually assures the premiership.
“With Suga not running in the LDP leadership election, there’s less chance of the LDP losing badly in the upcoming general election -- that will give support to the stock market,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co. Investors are expecting Suga’s successor to “push for speedier and more active spending” of stimulus money, he added.
Suga’s strategy of light virus restrictions for prolonged periods of time has stretched the patience of consumers and business owners and done little to lower infection rates. While government and central bank measures have minimized the economic impact, there is no end in sight for the emergency policy measures.
Japan is preparing to extend its current state of emergency order by around two weeks for Tokyo and three surrounding prefectures, the Mainichi newspaper reported Saturday.
The Topix is up 13% this year, far outpacing a gauge of Asian stocks amid Bejing’s recent regulatory crackdowns but trailing the nearly 21% gain in the S&P 500 Index.
“Japanese equities have long been lagging behind U.S. stocks,” said Hajime Sakai, chief fund manager at Mito Securities Co. “Earnings have been rising but stock prices weren’t, and foreign investors weren’t buying. With this news, they may revisit and raise weights for Japanese stocks.”
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