Nikko AM chief global strategist John Vail said the result of the election, which has seen prime minister Shinzo Abe win control of the upper house, will allow him to put through structural reforms, providing global investors with new opportunities.
“Many global investors have been sceptical of late about the structural reforms in Japan … but at Nikko AM … our belief is that these reforms will be even stronger than promised before the election, and undertaken with alacrity in what we call 'Super-Abenomics,'” Mr Vail said.
“In our view, Abe’s victory in the upper house is bullish for Japanese equities and the Japanese economy as a whole, as the removal of political headwinds bolsters the government’s ability to press forward with all ‘three arrows’ of its growth strategy.”
Mr Vail said the government stability may help corporate capex and housing investment as well as driving consumer consumption, which will build further wealth in Japan.
He said the reforms are also likely to permit a gambling industry and large-scale resorts in japan, as well as accelerating the restart of nuclear power plants.
While he agreed they are controversial issues, Mr Vail said the outcome will benefit the economy and will therefore benefit global investors.
“It’s understandable for there to be some scepticism from investors, but this time is different and investors need to open their eyes to this,” Mr Vail said.
“For instance, the five-year term of an activist Bank of Japan (BOJ) governor, after 15 years of conservative 'BOJ men', is not a short-term change, and the significance of the stability of the prime minister, after a decade of revolving chairs and instability, cannot be underestimated.
“While the consensus forecast for gross domestic product (GDP) in Japan for this calendar year is 1.8 per cent, we expect two per cent or higher, with more consistency continuing after that.
“Our view is that global investors should be seriously considering Japanese equities, or they may well miss out on major opportunities,” he added.
