Page 16 - DIY Investor Magazine | Issue 31

NEW PM, NEW DAWN FOR INVESTING IN JAPAN? Fumio Kishida inherits a much brighter situation than his predecessor as the state of emergency is lifted. We look at what this means for investing in Japanese equities. By Masaki Taketsume, fund manager, Schroder Japan Growth Fund PLC Japan’s ruling Liberal Democratic Party (LDP) has chosen its new leader. Fumio Kishida, a former foreign minister, won the leadership contest and has become the new Prime Minister (PM). He is seen as something of a continuity candidate, fending off the challenge of Taro Kono who some had perceived as the more dynamic, business-friendly option. However, any differences between the two candidates are a question of nuance. They are, after all, both established LDP politicians and the party is expected to win the general election that will be held at the end of October. ‘JAPAN HAS NOW FULLY VACCINATED A LARGER SHARE OF ITS POPULATION THAN THE US’ The change of PM has raised some concerns that Japan may be heading back into an era of political instability and short prime ministerial terms. We don’t see this as a particular worry. After all, Shinzo Abe was Japan’s longest-serving PM (with his second term lasting from 2012 until 2020), so any subsequent incumbent was always likely to serve a shorter term in office. BENIGN BACKDROP FOR KISHIDA Abe’s successor, Yoshihide Suga, became PM only a year ago and immediately faced two major challenges: the Covid-19 pandemic and hosting the Olympics Games, with the former a serious complication to the latter. Public dissatisfaction with the slow roll-out of Covid vaccines in Japan was one of the primary reasons for Suga stepping down recently. The slow pace of vaccinations combined with new waves of corona virus to see successive states of emergency imposed on most of the country this year. These weighed on domestic economic activity and also sent out an inconsistent message about the government’s priorities as the Olympic Games were held against the backdrop of a state of emergency in Tokyo. However, the vaccination campaign has accelerated substantially in recent months. Japan has now fully vaccinated a larger share of its population than the US, despite a much slower start. DIY Investor Magazine · Nov 2021 16