Japanese stocks have hit a 30-year high following the resignation of prime minister Yoshihide Suga. Suga, who has only been in office for a year, had become widely unpopular as his government failed to get on top of a surge in Covid-19 infections.
A slow vaccine rollout and the controversial decision to go ahead with hosting the Olympics despite the pandemic also sapped his support. He will step down before a general election scheduled for later this year.
Japan’s Topix index reacted to the news by hitting its highest level since April 1991, says Bloomberg. Investors had once had high hopes for Suga, who vowed to accelerate Japan’s digital shift (see also page 28). In February this year the Nikkei 225 index hit the symbolic 30,000-level for the first time since 1990. Yet it fell back as Covid-19 came to dominate his premiership: “Suga had created an atmosphere of uncertainty… there was a perception that Japan was ‘in a mess’”, says Richard Kaye of Comgest Asset Management Japan. The Topix has gained 6.5% during the past month alone.
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In most countries investors dislike the uncertainty of an upcoming election, says Takeshi Kawasaki for Nikkei Asia. Not in Japan. “Looking at the ten early elections held since 1990, stocks rose nearly every time between the day of the lower house being dissolved and the election date”.
What seems to happen is that headlines about Japanese politics grab the attention of foreign money managers. They decide they like what they see and buy. “Typically at the mercy of trends in US equities” thanks to Wall Street’s tendency to set the tone for world markets, Japanese stocks are likely to go their own way over the coming months.
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