The Nikkei 225 Average surging to 30-year high bubble adds an unpredictable element to the ruling party’s election in Tokyo.

The rally reflects optimism about a Japanese contest that starts Wednesday. Namely, that the next prime minister will be more concerned with reforms than the outgoing Yoshihide Suga.

The year-old Suga government was focused elsewhere, leaving investors hungry for moves to boost competitiveness in an economy watching China increase market share.

Unfortunately, little in the rhetoric from the four main candidates suggests policy shifts sizable or creative enough to justify this Nikkei surge. Will investors be left with buyer’s remorse?

Atsuto Sawakami, a legendary figure in Japanese equity circles, warns ultra-loose Bank of Japan liquidity has investors running far ahead of steps to raise the nation’s economic game.

The collapse of the bubble is just a matter of time,” says the founder of Sawakami Asset Management. “The time to act is now. Get as far away as possible from this growing, epic bubble.

A female leader could be just what Japan needs in the Covid-19 age. From Germany to Taiwan to New Zealand, women-led governments ran circles around the patriarchy with pandemic responses.

Under both Abe and Suga, by contrast, Tokyo prioritized the economy over public health.

Goldman Sachs, argues that Japan’s annual gross domestic product would get a 15% boost if the female labor participation rate – now about 70% – approached the roughly 85% rate for men.

Japan strategist Nicholas Smith at CLSA Securities says there’s a “numerical argument that Kishida will win the race to lead the ruling LDP and become Japan’s next PM on Wednesday. It’s not about bias or wishful thinking: it’s about numbers.

If market trust over Japan’s finances is lost, that could trigger a yen fall. If yen falls proceed, import costs would rise and cause inflation. The government and the Bank of Japan need to coordinate on economic and financial policy on this front.

Or, for that matter, bigger gains in a Japanese stock market that has already booked more good news than it’s likely to see from Japan’s next government.

Asia Times / ABC Flash Point News 2021.

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04-10-21 13:00

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