Japan investors bet on Suga’s Abenomics, buy travel stocks

Japanese investors are putting their money on Chief Cabinet Secretary Yoshihide Suga taking over as Japan’s next prime minister, and extending the economic policies that defined his predecessor’s nearly eight years in office.

They are betting Suga, the longtime lieutenant of outgoing prime minister Shinzo Abe who is stepping down for health reasons, will be able to secure enough votes among ruling Liberal Democratic Party (LDP) lawmakers when they hold a leadership vote on Sept.14.

A Suga government will mean the economic, fiscal and reform policies of Abe, dubbed “Abenomics”, will likely continue. Telecom shares fell as Suga has a long-standing position of wanting to reduce mobile phone tariffs while travel-related shares soared as he said last week that he wanted to promote tourism to get the economy back on its feet.

The Nikkei bounced back and the yen regained some stability as investors expect Suga to continue policies with a focus on supporting stock prices.

“Markets are starting to price in a Suga government. He will be a successor to Abe’s policies and there won’t be a political vacuum,” said Takashi Hiroki, chief strategist at Monex Securities.

The Nikkei rose 1.12 per cent to 23,139.76, wiping out all of its losses on Friday following the surprise news of Abe’s resignation. The yen also steadied at 105.62 per dollar.

The three mobile phone carriers were among the worst hit on the Tokyo Stock Exchange. KDDI dropped 4.7 per cent and NTT Docomo lost 3.4 per cent. SoftBank, subsidiary of SoftBank Group, shed 2.7 per cent.

Some market players also said airlines and railways gained on hopes of further measures to help revive the economy.

Suga had told Reuters last week Japan wants to avert another state of emergency and needs to consider more stimulus to revive the pandemic-hit economy.

West Japan Railway gained 3.6 per cent, Central Japan Railway rose 3.3 per cent and ANA Holdings added 2.6 per cent. “Suga’s stance will be to support the economy as much as possible while trying to avoid the collapse of the medical system,” said Tetsuro Ii, president of Commons Asset Management. “It’s not that the stock market hugely likes him but he is well accepted.”

Suga, who joins the race to take over from the country’s longest-serving prime minister, will likely face off against former defence minister Shigeru Ishiba, which media polls show is the most popular choice among the public.

Reuters