Japanese voters “opted for stability” during a general election on Sunday, says The Economist. The ruling Liberal Democratic Party (LDP) lost seats but retained its majority. It now falls to prime minister Fumio Kishida to put bones on his “fuzzy” pledges to create a “new model of capitalism”.
The Topix stock index rallied by 1.8% on the morning following the vote. Investors were relieved that the election delivered a stable government, rather than the more fractured parliament polls predicted.
Turnout was low as voters were presented with “few meaningful” policy differences, says Naoya Yoshino in Nikkei Asia. “Economically, both sides put forward generous distributive policies [centred] on direct financial benefits to the public.” There was little “real debate” about how to pay for it, nor about how Japan plans to decarbonise its economy. Investors are confused by Kishida, say Gearoid Reidy and Min Jeong Lee on Bloomberg. Some deride him as a dull continuity candidate who will continue the pro-market policy direction initiated by Shinzo Abe in 2012. But others wonder whether his talk about creating a “new capitalism” marks a more decisive break with Abe.
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Japanese stocks slumped in the weeks following Kishida’s elevation to the premiership in October, says Mariko Oi for the BBC. His idea that capital-gains tax should rise drew an angry reaction from business, prompting an “embarrassing policy U-turn”. While markets assess Kishida’s inclinations, the stocks continue to appeal.
More shareholder-friendly corporate governance, excellent multinational companies, high vaccination rates and advancing digitalisation mean that investors would now do well to follow the lead of so many Japanese voters and tune out the country’s politics.
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