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Foreign investor confidence in Japan to bloom again following Suga exit

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However, Hargreave Lansdown's Susannah Streeter argued that “gains may have been held back” by fears Suga’s successor may not be as “pro-business”.

Foreign investor confidence in Japan may be set to bloom following prime minister Suga’s departure from the helm, as the country emerges from its worst wave of the pandemic yet.  

Confidence plummeted eight per cent in August, according to data from Hargreaves Lansdown, as it grappled with rising cases alongside the 2020 Tokyo Olympics and tensions with neighbouring China.

However, Yoshihide Suga’s decision to not run for re-election will likely lift dented investor confidence in Japan, senior investment and markets analyst at Hargreaves Lansdown, Susannah Streeter explained.

‘’Investor confidence in the Japanese market had taken a hit as the country confronted its worst wave of the pandemic,” she said. “So, it’s not surprising that the news of Yoshihide Suga’s departure saw stocks in Tokyo lift in response.”

Telecoms investments

Investors have already piled in nearly $12bn (¥1.3 trillion) to the combined market valuation of Japan’s two largest listed telecom companies since Suga confirmed the news on Friday.  

The departing prime minister had led a campaign to cut the country’s mobile phone bills, which seemingly deterred investors from local telecoms giants Nippon Telegraph & Telephone (NTT) and KDDI.

Shares in both NTT and KDDI soared throughout the weekend and into Monday, up 3.8 per cent and 5.2 per cent today respectively, while traders and analysts mull Suga’s potential replacements.

The benchmark Topix Index added 1.1 per cent, climbing to the highest level since 1990, according to Bloomberg.

While its Nikkei Index ended up two per cent. However, Streeter argued that “gains may have been held back” by fears Suga’s successor may not be as “pro-business”.

“Suga was considered to be pro-business and had spearheaded a drive to promote a more digital focused economy, and push firms to become leaner and more efficient to solve Japan’s sluggish productivity problem,” she said.

“Investor confidence in Japan is now likely to lift, but the political turmoil of Suga standing down after only just a year in position, following the near eight-year Abe era, may weigh on future gains.”