What Abe wants: A rising stock market

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January 31, 2018

IT NOW seems clear that Abenomics has many more years to run. One should be wary of Japan sceptics  . . .

TOKYO — In a note on the implications of Prime Minister Abe’s re-election, the Chief Global Strategist of Nikko Asset Management, John Vail, along with NAM’s Chief Investment Officer — Japan, Hiroki Tsujimura, and Head of Japan Equity Fund Management, Jiro Nakano, say there is little doubt that Abe wants a rising stock market.
“Now that his term seems very likely to extend to 2021, Abe will likely work on a constitutional amendment to legitimise Japan’s military forces, and hike the VAT by 2.0 per cent in October 2019, but he will also continue to push for economic reforms and monetary accommodation,” they say.
“Since he is now the most powerful Prime Minister in modern Japanese history, he should be able to achieve all of these goals, especially now that the main Opposition party has been fractured by Yuriko Koike (who) will almost certainly push her Coalition (and all her supporters nationwide, most especially women voters) to vote for the Constitutional amendment.
“Rising stock markets encourage consumer spending via the “wealth effect”, at least among the wealthy segment that accounts for the majority of any country’s personal consumption. The capital gains associated with such are also a major factor in the future reduction of fiscal deficits.”