What is the market impact of Prime Minister Kishida's decision not to run in the next election?
Prime Minister Fumio Kishida announced on the 14th that he has no intention of running in the September LDP presidential election. Against this backdrop, the Nikkei average, which was initially dominated by buying, suddenly dropped by nearly 600 yen at one point. The USD/JPY also temporarily fell more than 80 basis points, leading to a yen strengthening to 146 yen per dollar. The yield on 10-year government bonds also fell by 1.5 basis points to 0.83%.
From October 4, 2021, when Prime Minister Kishida took office, until he announced his intention not to run, the Nikkei average achieved a 26.6% increase. On the other hand, the USD/JPY moved in the direction of a weaker yen with a 32.62% increase.
During Prime Minister Kishida's tenure, the post-coronavirus era began, and he advocated expansionary fiscal policies such as economic stimulus and wage increases. In May 2022, Prime Minister Kishida announced the expansion of NISA as a concrete measure of the 'Asset Income Doubling Plan'. In the spring labor negotiations in 2024, the average wage increase rate reached 5.10%, the highest level since 1991, raising expectations for deflation exit.
In the September LDP presidential election, potential successors such as Shigeru Ishiba, former Defense Minister, Taro Kono, Minister for Digital Transformation, Yoko Kawakami, Minister of Foreign Affairs, Toshimitsu Motegi, Secretary-General, Shinjiro Koizumi, former Minister of the Environment, Sanae Takaichi, Minister for Economic Security, and Katsunobu Kato, former Minister of Health, Labor and Welfare, are expected. Among them, there is a growing belief that only Sanae Takaichi will adopt a more accommodative policy stance.
Shoko Ooki, Chief Desk Strategist at Mizuho Securities, pointed out that 'Kishida's decision not to run for the prime minister may lead to fiscal and monetary tightening, and there is a risk that risk assets, especially stocks, will face headwinds.' The company also stated that 'the exchange rate of the yen is influenced by external factors, especially the economic data of the USA and the policy of the Federal Reserve Board.'
On the other hand, Masatsugu Mototani, Chief Japanese Stock Strategist at BofA Securities, commented that 'There is a tendency for approval ratings to rise when a new administration is inaugurated, making it easier to implement policies, and it is also possible that stock prices will rise.'
Tomoo Kinoshita, Global Market Strategist at Invesco Asset Management, pointed out that 'Prime Minister Kishida has been promoting an active fiscal policy, such as increasing defense spending. It is highly likely that the new leader will not expand fiscal policy as much as before, which may be a positive factor for the bond market in terms of fiscal soundness.'
Prime Minister Kishida has clearly opposed interest rate hikes in the past. On the other hand, there is a growing voice that a path to additional interest rate hikes is opening up, as many successor candidates support efforts to normalize monetary policy.
Eiji Doke, Chief Bond Strategist at SBI Securities, commented that 'It will be easier for the Bank of Japan to advance its financial normalization strategy. Prime Minister Kishida was the most opposed to interest rate hikes.' He also commented that 'However, it has become difficult to raise interest rates within the year.'
Additionally, Shinichi Ichikawa, Senior Fellow at Pictet Japan, stated that 'It is almost certain that the House of Representatives will be dissolved in October and a general election will be held in November, regardless of who the next prime minister will be.'
Source: Nikkei, Bloomberg, moomoo
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Chibou : It's not there
182169099 : Nainai ･ω･`) ･ω･`) Just Taro Kono please stop next time
大負けネコ : I totally agree. The beginning of the “major stock price crash” due to hawkish interest rate hikes & yen appreciation and dollar depreciation was “Kono Digitaro's thoughtless yen appreciation correction statement,” so it's not strange that he was a “Class A war criminal” and the death penalty. I took a screenshot of the “negative moment in market capitalization” screen of the Tokyo Stock Exchange 3 market as of 14:45 on 8/5 and looked back at it, but it was “over minus 103 trillion yen
️” 15 minutes before closing. Mogi was also inducing interest rate hikes, so he was a “Class A war criminal.” Takaichi is the late Prime Minister Abe's “waist purse,” and that's because Mr. Ishiwari is right-wing. I want the former Minister of Economy, Trade and Industry, or someone with “insight” who is familiar with the economic situation to do it. I don't need a bazooka anymore.
182996731 : bazooker bazooker (lol)
Rocket rocket
Who will have the next atomic bomb (lol)
ハップー : Looks like Kawakami and the like can resolve it peacefully. (*'▽'*) laugh