Japanese Stocks Get Some Relief from BoJ Governor and New Prime Minister
The NIKKEI225 fell 5% after Ishiba was elected as the new prime minister on fears of his hawkish stance on rates and fiscal policy.
Minister Make Dovish Statements
The NIKKEI225 fell 5% after Ishiba was elected as the new prime minister on fears of his hawkish stance on rates and fiscal policy.
This perception seems to have faded as various analysts have expressed opposite views in interviews. The NIKKEI225 recovered 2.1% on Monday and has stayed above recent lows for now.
Four analysts expressed the opinion that the new prime is likely to take a moderate stance on economic policy. He has also made comments that he believes the central bank should take a more accommodative stance on interest rates.
The market view of Ishiba has in the past been that of higher taxes and more monetary policy tightening. However, that posture seems to have changed since he became prime minister.
Market Support from BoJ
The BoJ governor had also expressed his view that monetary policy would continue to be restrictive given rising inflation.
However, after the recent market turmoil after the last interest rate hike, the governor has set about reassuring investors that the pace will be slow. In a meeting with the securities industry, Ueda highlighted the central bank’s focus on underpinning a weak economy.
The central bank governor confirmed his view that the economy would mange to sustain a recovery, and that inflation would converge to the 2% target. He stated that, “Uncertainty regarding Japan’s economy and prices remain high.”
However, he didn’t repeat his past statements of pursuing higher interest rates if inflation continues to move in line with the BoJ’s expectations. Today, he stressed concerns of economic risks from overseas and market instability.
“The outlook for overseas economies, including that of the U.S., remains uncertain, while financial market are still unstable,” he said. “For the time being, we will scrutinize such developments with extremely high vigilance.”
The market remains on a tentative path with little direction over the past two session. However, weakness from the U.S. may continue to filter to the NIKKEI225 and mixed forecasts on the strength of the yen may undermine its performance.
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