Since 3 September, when Prime Minister Suga announced his resignation, Japanese equities have rapidly closed the gap as performance laggards European and US equities. The rise has been comparable to that of European stocks, but not to that of US stocks.
This is likely due to progress of vaccination rollout in Japan and a reduction in political uncertainty following Suga's resignation. In the past, we have seen a rise in share prices around polling day in the House of Representatives.
In order for Japanese stocks to maintain momentum and further close the gap, we need to see sustained expectations of policies/reforms to further comfort global investors. Therefore, we will keep a close eye on whether the new government's policies and reform agenda will live up to expectations.
Written by Takeru Ogihara, Chief Strategist, Asset Management One Co., Ltd.
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