Investors see Japan’s Kishida as market-friendly but reforms in question

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TOKYO/MUMBAI, Sept 30 (Businesshala) – Investors see Japan’s new leader, Fumio Kishida, as a steady consensus-builder to help the ruling Liberal Democratic Party and its coalition ally win a general election in November. Can lead.

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But Japanese stocks are expected to benefit from Kishida’s favorable market image, less political uncertainties and an improved economy, with investors unsure whether he can proceed with the tough measures needed to boost economic health.

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Reasons to become 64 year old Kishida prime minister next week, inherited an economy that is picking up steam due to falling coronavirus cases, rising vaccinations and a better earnings outlook.

Backed by David Chao, Global Market Strategist at Invesco, Japan expects growth in consumption and household spending, outpacing the United States, Britain and Europe fiscal and monetary stimulus.

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“The reflation trade for Japanese equities is just starting and I’m bullish on Japanese risk assets,” Chao told Businesshala Global Markets Forum (GMF).

Japanese shares (.MIJP00000PUS) are up 1.6% in September, outperforming those in the United States (.MIUS00000PUS) and Europe (.MIEU000000PUS) by more than 3%.

John Weil, chief global strategist at Nikko Asset Management, told GMF that foreign investors were “facing underweight” due to strong corporate profit margins, low equity valuations and removal of production constraints.

Nikko Asset Management forecasts the Nikkei share average to reach 31,800 in December and 32,700 by June 2022.

Chao and Well both expected Kishida to continue Political, Economic and Monetary Policies His predecessors were Shinzo Abe and Yoshihide Suga.

“Kishida can be seen as a safe pair of hands, especially on the diplomatic front,” said George Boubours, head of research at K2 Asset Management in Melbourne.

Chao said continuing with the policies also meant reducing the “risk of premature fiscal belt tightening”.

However, Vail said Japan would not need any immediate stimulus beyond the 30 trillion yen ($270 billion) package already proposed by Kishida, as the economy would start doing “very well” in the fourth quarter.

Kishida held important positions under the leadership of Abe, who has considerable influence in the ruling party, but his reserved style has also raised questions about whether he can push through reforms to boost competition. Huh.

One investment said, “Markets probably see the outcome as a decision by LDP to avoid changes. If you put it well, Kishida represents stability. But if you put it badly, So the ship will slowly sink and it won’t change.” Manager in a major Japanese insurance firm.

Abe’s promise to roll out structural reforms nearly a decade ago excited investors, but many think he fell short when it came to delivering results.

“If Kishida can present an inclination towards structural reform, it will likely be appreciated by offshore investors and will result in an influx of Japan’s stock market,” said Yunosuke Ikeda, chief equity strategist at Nomura Securities.

In the near future, major policy initiatives are unlikely as the election for the lower house should be held by November 28.

“It would be difficult to talk about any painful reforms,” ​​said Shinichi Ichikawa, Senior Fellow at Pictet Asset Management.

“I don’t think investors will build big positions before the election without knowing what kind of policies will be implemented.”

Reporting by Hideyuki Sano, Divya Choudhury and Tom Westbrook Additional reporting by Kevin Buckland in Tokyo Editing by Robert Birsel and Steve Orlofsky


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