Japanese stocks take ‘Kishida shock’ as new leader suggests tax hike


Japanese stocks suffered a “shock Kishida” selloff on Tuesday as foreign funds and retail investors bet that the country’s new prime minister will step down from efforts to make the world’s third-largest economy more shareholder-friendly.

Traders said some investors were frightened by comments from newly appointed Fumio Kishida that he could push for a capital gains tax hike – a potentially brutal rhetoric reversal. ” buy Japan “reform-oriented with which foreign and domestic investors have been pressured into the market since 2013.

Within 24 hours of his official appointment on Monday, the phrase “Kishida shokku” – shock Kishida – was all the rage on social media and online investment sites.

The benchmark Topix index fell 3 percent in the morning session before recovering slightly to narrowly avoid the 2 percent drop that would cause the Bank of Japan to support the market by buying funds traded in. stock Exchange.

Until last week, the central bank had only intervened in the Tokyo stock market three times since April, suggesting it was engaged in a stealth reduction of an ETF buy program. which has been going on for over a decade.

Since Kishida was chosen by the ruling Liberal Democratic Party to serve as Prime Minister of Japan on September 30, the BoJ has been forced to intervene twice with a combined purchase of 140 billion yen (1.3 billion dollars) of ETFs.

Although the sale of Tokyo shares came amid growing concern over global inflation, oil prices and an implosion of the real estate market in China, traders said Japanese stocks were down following the Kishida’s disappointment.

After the market closed on Tuesday, the Mainichi Shimbun newspaper published a poll showing public approval for Kishida at 49% – well below the 64% support Yoshihide Suga received during his first days in office last year.

“We have several macroeconomic factors weighing on the market, but yes it seems investors aren’t impressed with the Kishida firm and so it’s no big surprise if offshore investors are disappointed and see this as an opportunity. sales, ”said Nomura’s director of shares. strategist Yunosuke Ikeda.

After Suga announced his resignation on September 3, Japanese stocks started to rise sharply, propelling the Topix to a 30-year high. But those gains have mostly reversed, with Topix dropping 4.4% since Kishida won the four-lane LDP leadership race.

Kishida has pledged to deliver a massive stimulus package to deal with the fallout from Covid-19, which should help actions. But Tomoichiro Kubota, senior market analyst at Matsui Securities, said retail investors in particular were frightened by his suggestion to increase Japan’s 20% capital gains tax on stock transactions in order to reduce the gap between the rich and the poor.

“As we debate a new form of capitalism, various policies will be needed. . . to achieve a virtuous circle between growth and distribution, ”Kishida said on Monday. “We must take into account the tax on financial income. I mentioned it as one of the different options.

It is not yet known whether Kishida will be able to raise the tax rate. The impact of the measure on the stock market would also be different depending on how it was structured. “But the overall message is certainly not positive for the market,” Kubota said.

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