mbbirdy
By Kei Okamura
Two key events have rocked Japan: the assassination of former Prime Minister Shinzo Abe and the landslide victory of the ruling coalition.
What a difference a few days make. The assassination of Japan’s longest-serving former prime minister shocked the nation and markets, pushing up the yen and sending stocks lower, before their recovery by market close the same day. Although Shinzo Abe resigned two years ago, he continued to wield influence on Japanese politics as the chief of the ruling Liberal Democratic Party’s biggest political faction.
To illustrate, current Prime Minister Fumio Kishida announced his draft economic strategy early this year, but the final version omitted a commitment to balance Japan’s national budget after meeting fierce opposition from Abe and his allies, who favored aggressive national spending to prime the economy. The general elections that took place just two days after Abe’s death saw the ruling coalition expand its dominance of the upper house. It could be suggested that some of those winning votes reflected public sympathy toward the late former premier.
Many believe that, in the near term, Kishida will not dial back on fiscal stimulus and monetary easing – the first two arrows of “Abenomics.” He’s pledged an economic package to combat rising prices and suggested more stimulus is on the way going into 2023. In the meantime, we expect the government to continue supporting the Bank of Japan’s decision to maintain quantitative easing, despite the depreciating currency.
The changed balance of power will likely, over time, allow Kishida to solidify leadership within the party and implement policies envisioned under the “New Capitalism” plan, which focuses on human capital investment, supporting start-ups and pushing efforts to decarbonize and digitalize the economy. We believe this has the potential to help Japan achieve more sustainable growth in the long term.
Kishida has both the public and time on his side, as his public approval remains among the highest on record while the next election is three years away. Although far from a done deal, prospects of constitutional reform have increased as the ruling coalition and like-minded allies now control the majority of both houses of Parliament.
The Bank of Japan is scheduled to appoint a new governor in April 2023. While we don’t expect any immediate changes, over time we anticipate that some of the unique initiatives, such as yield-curve control, will be reviewed.
Recent days have been a rollercoaster for Japan, but we believe this remains a market of great potential for long-term investors.
This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Investment decisions and the appropriateness of this material should be made based on an investor’s individual objectives and circumstances and in consultation with his or her advisors. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. The firm, its employees and advisory accounts may hold positions of any companies discussed. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. This material may include estimates, outlooks, projections and other “forward-looking statements.” Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed.
Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.
This material is being issued on a limited basis through various global subsidiaries and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com/disclosure-global-communications for the specific entities and jurisdictional limitations and restrictions.
The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.
© 2009-2022 Neuberger Berman Group LLC. All rights reserved.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Be the first to comment