A decisive election win for Japanese leader Shinzo Abe (pictured) was hailed as positive news for Japanese equity investors.
The Liberal Democratic Party, alongside its junior coalition partner Komeito, retained a two-thirds majority, indicating strong support for the Abenomics programme of reforms.
Abe's win, “paves the way for substantial fiscal stimulus in 2018, whilst maintaining loose monetary policy”, said Chris Taylor, head of Japanese equities at Neptune Investment Management. “Both of these are seen as big positives for the market.”
Earlier this month,
it seemed a challenge from the newly formed Party of Hope led by Tokyo's mayor, Yuriko Koike, would threaten Abe's majority. However, success in the polls did not translate into success at the ballot box for the challenger.
Japan still faces economic challenges. Its companies have a habit of hoarding cash on their balance sheets rather than reinvesting it, said Yasunori Iwanaga, chief investment officer of Amundi Japan. Meanwhile, the central bank is constrained. “With consumer prices undershooting its target, the central bank has no room to start normalising its policy,” said Iwanaga.
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