Nikkei cool on poll outcome
JAPAN’S Nikkei stock index ended the day down yesterday as an early boost from Sunday’s landslide election victory for the Democratic Party of Japan (DPJ) over the ruling Liberal Democratic Party (LDP) was quickly reversed.
The benchmark Nikkei-225 closed down 0.4 per cent at 10,492.53, despite gaining 196.78 points, or 1.87 per cent in the first 15 minutes of Monday trading to reach an 11-month intraday high of 10,730.92.
Julian Jessop, chief international economist at Capital Economics, said the limited positive impact of the election result was because a DPJ victory had been expected, adding that the party might seek to reverse financial reforms.
“Talk that the DPJ would adopt a stimulatory fiscal policy and boost consumer spending more than the LDP would have done certainly seems wide of the mark,” said Jessop.
“Less positively, the DPJ has indicated it would roll back… improvements in labour market flexibility and deregulation that have helped the economy and corporate profitability in recent years,” he added.
The DPJ swept to victory on the back of promises to help families with around $75bn (£46bn) in financial handouts, which it plans to pay for by shaving the country’s budget and selling off state assets.
Party leader Yukio Hatoyama, who is sitting down with coalition allies to form a government, said the party would also rein in bond issuance.
“We need to do some soul-searching about the past practice of spending freely without limit and then selling bonds if there was a budget shortfall,” he said.