Tokyo: Japanese Prime Minister Yoshihide Suga said on Friday he would not run in a ruling party leadership race in September and would step down, setting the stage for his replacement after just one year in office. Japan's Topix stock index rose 1.6 per cent to a 30-year high in afternoon trade after the news and the Nikkei jumped about 1.8 per cent. The Japanese yen bobbled higher before drifting a fraction lower to 110.025 per dollar.
Here are some initial reactions to the news. According to Jim McCafferty, Joint Head for Asia Equity Research, Nomura, "I guess we are possibly back to the politics we have known in Japan pre-Abe. If you look at post-war Japanese politics, the average tenure of prime ministers has been a lot less than four years.
"From a stock market point of view, we know that the LDP has got a firm position and there isn't really any credible opposition. There's quite a bit of certainty around issues such as corporate tax or anything that could affect share prices.
"The market reaction might be a combination of other factors, on currency, on the US, on the rest of the world. I think the political equation is quite modest. Investors in Japanese equities are used to frequent changes of Prime Minister within an LDP context."
For Moh Siong Sim, Currency analyst at Bank of Singapore, "It really depends on who is next and who is running for the position. From a market practitioner standpoint, the question to ask is whether policies will change, and if policies aren't changing then it doesn't matter too much to the market.
"It doesn't seem that it's about policies, it seems that it's about personalities. For dollar/yen, it's mostly a US dollar side story."
No surprises here
Kay Van-Petersen, Global Macro Strategist for Saxo Capital Markets, "It should not be a surprise, Abe was a once in a multi-generation leader and it will be a while before Japan sees that form of leadership again. We can expect fiscal and political gridlock for future administrations, which is not constructive for long-term policy and monetary policy is tapped out with ... they are all out of bullets and Godzilla (Abe) has left the building."
Not so sure
But Daiju Aoki, Chief Japan Economist at UBS Sumi Trust Wealth Management, reckons: "It was a surprise, but it provided more certainty and forward-looking prospects rather than uncertainty as the market had been informed of Kishida's policies (at his Thursday press conference) such as expansionary fiscal policy, support for household incomes and new measures to combat the coronavirus."
