Japan’s Stocks Jump as Ruling Party Secures Election Victory
(Bloomberg) -- Japanese stocks jumped after the ruling coalition secured an election victory that was better than many had expected, paving the way for the administration of Fumio Kishida to begin enacting economic stimulus.
The benchmark Topix gained 2.2%, the most since Sept. 24, while the blue-chip Nikkei 225 Stock Average climbed 2.6%, the most since June 22. Utilities were among the sectors that gained from the pro-nuclear Liberal Democratic Party’s win, with Tokyo Electric Power Co. and Kansai Electric Power Co. both rising.
The ruling LDP defied worst-case scenarios to secure a majority by itself. While the party lost 15 seats, the losses were less than forecasters expected. The victory allays immediate fears that Kishida, whose early polling numbers were unimpressive, might become another short-term prime minister after predecessor Yoshihide Suga lasted just a year on the job.
“The market will react positively to the fact that the LDP didn’t lose that many seats,” said Masahiro Ichikawa, the chief market strategist at Sumitomo Mitsui DS Asset Management. “Had the LDP failed to secure a majority by itself, market expectations for the longevity of the Kishida administration would have been shattered.”
Department stores including Marui Group Co. advanced along with other reopening plays, as expectations grow for the potential resumption of a popular travel subsidy program or a relaxing of Japan’s strict border controls.
“It seems likely that now that the election is over, there will be more willingness to allow vaccinated tourists to enter the country, so some of the travel-related portions of the stock market and economy should recover over the intermediate term,” John Vail, the chief global strategist at Nikko Asset Management Co., wrote in a note on Monday.
The yen weakened 0.3% to 114.23 per dollar. The yield on the benchmark 10-year government note added 1 basis point to 0.105%.
“The fact the LDP has secured a majority is a risk-on factor that’s negative for the yen,” said Shinsuke Kajita, the chief strategist at Resona Holdings Inc. in Tokyo.
Calling the election was one of the first acts taken by Kishida after being elected LDP leader in September. He aims to enact an economic stimulus package that estimates have put at about 30 trillion yen ($263 billion). The prime minister is also set to lay out emergency proposals for his “new capitalism” early this month.
“First and foremost we’ll have stability, and for the short-term investor in Japanese stocks that’s great news,” said Richard Kaye, a portfolio manager at Comgest Asset Management Japan Ltd. “There’s going to be no uncertainty, no major changes in policy.”
Among those who lost seats was Secretary General Akira Amari, who was reported to have tendered his resignation from the senior party role following his defeat. Kishida plans to accept the resignation, the Mainichi reported on Monday, and markets will be watching to see who he will choose to replace Amari, who was not a popular pick for the role following his resignation from economy minister in 2016 amid a funding scandal.
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