Japan Investors Cheer ‘Good Listener’ Kishida’s Tax-Policy Reversal
Japan Investors Cheer ‘Good Listener’ Kishida’s Tax-Policy Reversal
(Bloomberg) -- Asked to describe himself in the race to become Japan’s Prime Minister, Fumio Kishida often gave one answer: that he was a “good listener.” His quick retreat on plans to raise the country’s capital gains tax shows that he is certainly listening to stock traders.
Japanese equity markets Monday cheered Kishida’s comments over the weekend that he wasn’t thinking of reviewing the nation’s capital gains taxes for now. His remarks, which along with a weakening yen helped drive the Nikkei 225 Stock Average up 1.6%, followed a plunge in equities since he won the vote to replace Yoshihide Suga.
“A misunderstanding has been spreading that it’s something we’ll do soon,” Kishida said on a Fuji TV news program Sunday. “That needs to be cleared up to avoid any undue anxiety.”
The remarks were a “de facto shift in policy,” economists at Morgan Stanley MUFG Securities wrote in a report. “Market concerns that the Kishida administration might give undue weight to redistribution over growth should be allayed to some extent.”
The prime minister’s talk of a “new form of Japanese capitalism” and pledges to redistribute wealth to narrow the gap between rich and poor have been the cause of much anxiety in Tokyo markets since his election. “Kishida Shock” became the talk of the town as the Nikkei fell for eight straight sessions through Oct. 6, its longest losing streak since 2009.
“Kishida’s retreat is a relief to the stock market,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co.
Kishida had already been backing away from the plan -- he didn’t mention the tax in his first speech to parliament as prime minister on Friday, and the previous Monday during his first press conference said it was merely “one choice among many.”
Others cautioned that Kishida’s reversing course on one of his most-cited policies wasn’t encouraging for his long-term prospects.
While the news “will have a short-term positive impact on the sentiment of domestic investors, the fact that he’s changed tack in such a short period is a minus for confidence in long-term policies,” said Norihiro Fujito, the chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “Taken as a whole, it’s neutral for stocks.”
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