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Nikko AM: Market impact of Japan election results

Nikko AM Chief Global Strategist John Vail discusses the market impact of Japan’s lower house election results.

“Indicators of market activity show that there will be a positive market impact to the election, as although it was not greatly different than expectations, the LDP clearly surpassed some of the more dire polls of last week and there will not likely be any party shake-up in the intermediate-term. Although a few LDP heavyweights lost their seats to a unified opposition candidate, some have been appointed to general seats won by the party and thus, provide some continuity.

“Furthermore, the market is reacting positively to the US rally on Friday.

“It seems likely that now that the election is over, there will be more willingness to allow vaccinated tourists to enter the country, so some of the travel-related portions of the stock market and economy should recover over the intermediate term.

“Political risk is always quite low in Japan, with the ministries providing a stable backdrop, and there seems a sturdy consensus among all the major stakeholders to progress logically towards a greener and more digitalized economy, with greater egalitarianism, sustainability and diversity. Besides new technology, conservation and efficiency efforts, nuclear power will likely be encouraged as part of Japan’s green commitments, which will occasionally likely prove controversial. A stronger national defense and safer supply chains also seem set to be emphasized in the future.”

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