Shinzo Abe shooting raises policy doubts among analysts as yen rises

The firing of former Japanese Prime Minister Shinzo Abe sparks market debate over a possible loss of support for the Bank of Japan’s super-easy monetary policy following an initial rush to acquire assets on Friday.

The yen gained on Treasuries, with the currency surging as much as 0.5% as details leaked out about the shocking attack on a political event in the western city of Nara. Abe is seen by many as a key supporter of BOJ Governor Haruhiko Kuroda’s policies, which have weighed on the yen all year.

Some strategists suggested the currency could boost earnings — and stocks plummet — if the news precipitates a policy rethink at the central bank. Abe is best known for his plans to revive Japan’s faltering economy through unprecedented monetary easing and regulatory reforms. Others argued that any impact would be temporary. Japan will hold upper house elections on Sunday.

Shares in Tokyo rose earlier gains as they reopened after the lunch break, but remained higher.

Here is a selection of comments from market participants:

Pillar of monetary easing

“Abe had a strong image under Abenomics and supported Governor Kuroda,” said Tetsuo Seshimo, portfolio manager at Saison Asset Management Co. “Abe’s image of a ‘spiritual pillar of monetary easing’ may also have contributed to this widespread turmoil.”

“However, Abe is currently not the prime minister and this should not have an indirect impact on economic and monetary policy,” Seshimo added. run.”

Long term effect

“This could have a medium to long-term impact, and markets will see a significant appreciation in the yen and a decline in stock prices,” said Tomoichiro Kubota, senior market analyst at Matsui Securities. from Japanese Governor Kuroda; the bank’s policy could change because they would lose its support.”

“After all, the LDP has strongly promoted Abenomics’ reflationary policies even after Prime Minister Kishida took over,” Kubota said. policy at this time”

Change for Japan

“Since Abe is probably more known abroad than Kishida, the reaction in the foreign exchange markets may be greater once trading starts in London,” said Mari Iwashita, chief economist at Daiwa Securities. “He has led Abenomics, so the perception may change that Japan will change.”

“There may be sympathetic support for the ruling Liberal Democratic Party in Sunday’s elections,” Iwashita added. “Given the lack of details, JGB market players are likely to adopt a wait-and-see attitude.”

Pulling strings

“Abe was well known outside of Japan and foreign investors viewed him favorably,” said Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank. It was clear he was pulling the strings behind the scenes in many ways.”

“If it becomes possible for Kishida to implement the policies he wanted, such as financial taxes and share buyback regulations, it would be negative for the markets.”

Political risk premium

“The yen is showing a small bid for a safe haven on the news of the shooting of former Prime Minister Abe; political risks now have an extra premium in the run-up to the weekend’s election,” said Rodrigo Catril, strategist at National Australia Bank Ltd. in Sydney.

Path unclear

“Whether the yen appreciates further remains unclear. Abe is not the current prime minister and is a former prime minister, so that can be taken into account,” said Akira Moroga, currency products manager at Aozora Bank in Tokyo.

Temporary response

“Since he is not a current prime minister, the reaction will likely be temporary,” said Fukuhiro Ezawa, Japan’s chief financial markets director, Standard Chartered Bank.

This story was published from a news agency feed with no text changes. Only the headline has been changed.

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