The Japanese market continue to act as the outlier in major markets, falling over the month as global markets rebounded. Investors held reservations due to policy uncertainties, the Yen also fell due to the relative weakness against the Dollar, the Nikkei 225 was down by 1.90% (4.18% in US$ terms), while the TOPIX was down by 1.43% (3.72% in US$ terms).
The LDP election ended with Fumio Kishida as the new prime minister of Japan, there were concerns over whether the LDP can keep the majority in the House of Representatives after the election. Uncertainties further increased with Kishida’s brief mention of capital gains tax changes after becoming the PM, which was unpopular and he did subsequently backtrack, but such comments still raised concerns over the new government’s policy directions. Concerns dissipated as the ruling LDP has once again secured a majority in the latest general election, this should stabilise the political landscape.
This is supportive to the equity market, as the majority in the House allows the economic stimulus plans to be enacted smoothly. Economic fundamentals of Japan have shown improvement recently, we also noticed that Japan have not felt the heat from the rising inflation across the globe, allowing the supportive monetary policy to stay unchanged for the time being. With the local sentiment favourable, we are still confident that the Japanese equity market can perform in the short to mid-term as long as monetary conditions permit.