Investors appear unimpressed with Japan’s new leader. The ruling party has chosen Fumio Kishida to replace Yoshihide Suga as the head of the world’s third-biggest economy. Kishida was the continuity candidate.
That means more loose fiscal and monetary policy, “decarbonisation, digitalisation” and the “promotion of free trade”, says Ma Tieying of DBS. The new government is preparing to launch yet another stimulus package, worth at least 5.5% of GDP. Happily, Covid-19 is back under control in Japan, with vaccination rates now exceeding those in the US. Japanese stocks rallied in September when Suga announced his resignation, say Toshiro Hasegawa and Gearoid Reidy on Bloomberg. There was hope that Japan could turn the page on a difficult year. It is a measure of just how “uninspiring” investors find Kishida that the benchmark Topix index has since given back all of their post-Suga gains.
Kishida has got off to a bad start with investors, say Leo Lewis and Kana Inagaki in the Financial Times. This week he suggested that he could increase Japan’s capital-gains tax. The resulting selloff, dubbed the “Kishida shock”, sent the Topix down by 3% on Tuesday. Higher taxes would mark a “sharp reversal” from the pro-investment line taken by Tokyo since 2013.
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Japanese investors aren’t that gloomy, say Hideyuki Sano and Tom Westbrook on Reuters. The country’s shares outperformed both the US and Europe last month. A better Covid-19 picture and improved corporate earnings outlook also bode well. Supporters view Kishida as “a steady consensus-builder”, but many doubt he can see through overdue structural changes to Japan’s “old-fashioned” bureaucracy. He will face the voters in a general election at the end of this month.
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