TOKYO (Reuters) – Japan’s Nikkei fell as much as 2% before recouping some losses and the yen rose on Friday on news that Prime Minister Shinzo Abe was set to resign.[MKTS/GLOB]
A person familiar with the matter said Abe, the nation’s longest serving premier, had decided to step down.
Public broadcaster NHK earlier said Abe, who has battled the disease ulcerative colitis for years, wanted to avoid causing problems for the government due to the worsening of his condition.
Abe was scheduled to hold a news conference at 5:00 p.m. (0800 GMT).
Following are analysts’ comments on the market impact:
SHINGO IDE, CHIEF EQUITY STRATEGIST, NLI RESEARCH
“The stock market has rebounded a bit for now but I think we need to be cautious, going into next week. Whoever succeeds him, it will be tough to garner strong support and political uncertainties will likely weigh on markets.”
ROB CARNELL, ASIA-PACIFIC HEAD OF RESEARCH, ING
“Japan needs to spend a lot of money right now, it needs to forget about debt. It could also do with perhaps reinvigorating the BOJ a bit, it’s more of the same from them all the time. So there’s stuff to be done. I think he should have stuck around.
“It’s usually a thing with markets, better the devil you know…. without knowing who’s going to step in and whether they’re actually going to breathe a bit of new life into this or not, I guess markets are going to be a little unsettled by the unknown.”
SHANE OLIVER, HEAD OF INVESTMENT STRATEGY, AMP CAPITAL, SYDNEY
“I don’t see a big change on the economic policy front. There is no real alternative to Abenomics (basically ultra easy fiscal and monetary policy) whoever takes over and Kuroda will remain at the BoJ so there will be no change to ultra-easy monetary policy. There will be a bit of short term market nervousness, though but I think that will soon pass.”
KHIEM DO, HEAD OF GREATER CHINA INVESTMENTS, GLOBAL MARKETS, BARINGS, HONG KONG
“I don’t think this will be that significant. Globally the economy is not that strong, and any prime minister, any leader in Japan would try to continue to be as expansionary fiscally as possible.
“The correction in Japanese stocks could be quite a good buying opportunity. I don’t know exactly where the selling is coming from, but one would’ve thought that’d be more retail and trading oriented money on the uncertainty this may cause.
“Japan is one of the slowest economies to recover from the COVID-19 pandemic. Japan would have to do more than others. Any weakness in the Nikkei or Topix would be good buying opportunities.”
PAUL SANDHU, HEAD – MULTI-ASSET QUANT SOLUTIONS, ASIA-PACIFIC AT BNP PARIBAS ASSET MANAGEMENT, HONG KONG
“The reaction right now is temporary. It’s a bit of pull back but we’ll get back on track.
“Abe built his administration around reviving the Japanese economy through policy spending and monetary easing… It is still unknown when Abe will actually leave office but we can be sure that his primary focus will be to end his term by helping to reverse the economic impact of this virus and get Japan back to a point where it can put on the 2021 Olympics.”
TAKESHI MINAMI, CHIEF ECONOMIST, NORINCHUKIN RESEARCH INSTITUTE
“It’s regrettable for him because it means he had to resign over the same issue twice…. The focus at the moment will be on the coronavirus recovery and controlling the infection, regardless of who will be the prime minister.
“There has been talk that Abenomics has been having a harmful impact so I think the focal point will be on suggestions how to make changes to it.
“Of course, Abenomics stood for a weak yen and high stocks so it is unavoidable that markets are showing a response in the opposite direction.
“It’ll be important what kind of vision the person who’ll be the next prime minister will stand for. The market’s direction will likely depend on whether the Abenomics line is followed or corrected.”
JUNICHI ISHIKAWA, SENIOR FOREIGN EXCHANGE STRATEGIST AT IG SECURITIES IN TOKYO
“This is a negative for Japanese stocks because it raises questions about what policies come next. We do see the familiar pattern of falling stocks pushing up the yen, but the important point is U.S. stock futures remain in positive territory, showing sentiment is holding up.”
MOH SIONG SIM, CURRENCY ANALYST, BANK OF SINGAPORE:
“There’s been speculation all week about Abe resigning. There’s some nervousness and concerns because he’s the longest serving prime minister and, with him gone, there could be some uncertainty. Perhaps ‘Abenomics’ is coming to a close. And perhaps we could see some repatriation and this is why the yen has strengthened somewhat.
“I’m not convinced it would have a lasting impact on the yen itself, because if the news is true, whoever the successor is likely to come from the LDP and is likely to be a close ally and therefore policy continuity would still be there.”
DAISUKE KARAKAMA, CHIEF MARKET ECONOMIST AT MIZUHO BANK
“The currency market is stable right now. But for the past month, I have received inquiries from overseas about what would happen if Abe (resigns). These inquiries, they were mostly about worries over the impact on stocks market. What changed the most with the Abe administration was the stock market, with foreign investors buying Japanese stocks. If the Nikkei share average continues to be disturbed, just like it is happening right now, this would mean the yen could strengthen.”
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