Precise Investors

Sunday, January 29, 2023
Stocks & Shares

Japan stocks hit a month-high after Kishida wins election

Japan stocks

The Nikkei share average gained 2.25% to 29,543, reaching its highest level since late September, while the broader Topix added 1.52% to 2,031.71

Japan’s Nikkei stock index hit a one-month high on Monday, buoyed by expectations of a stable government and more fiscal stimulus after Prime Minister Fumio Kishida’s ruling party held on to a majority in a parliamentary election.

The Nikkei share average gained 2.25% to 29,543, reaching its highest level since late September, while the broader Topix added 1.52% to 2,031.71.

Kishida’s conservative Liberal Democratic Party (LDP) retained its majority in the powerful lower house in Sunday’s parliamentary election and is expected to roll out an extra budget to support pandemic-hit businesses.

The market was lifted by a positive surprise of the LDP’s solo majority win at the election. Investors are now more confident in a stable, long-term administration of the party, said Kentaro Hayashi, senior strategist at Daiwa Securities.

The election results will boost stock prices in the short term and, by enhancing the risk-on mood, it could be a tailwind for the dollar/yen, said Osamu Takashima, chief currency strategist at Citigroup. But the poll results endorsed his wealth distribution policies to a certain extent. For stock markets that expect reform and growth, they may be a bit underwhelming.

That disappointment was behind Japanese shares’ underperformance last month, when the Nikkei shed 2.2%, compared with 6.9% gains in the U.S. S&P500.

Kishida said on Sunday he aimed to compile an extra budget by the end of the year for a stimulus package to support people hit by the pandemic, such as those who lost jobs and students struggling to pay tuitions.

While that provided investors some short-term relief, analysts turned to doubts over what Kishida will deliver.

While we see the election results as positive for the stock market over the near-term, we will need to keep an eye on the political situation further out, analysts at JP Morgan wrote.


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