REOPENING IN JAPAN
Japanese stocks jumped nearly 4% in September as Yoshido Suga stepped down as Prime Minister, clearing the way for Fumio Kishida to take the reins of the Liberal Democratic Party (LDP) and the government’s controlling position. The new PM is calling for a general election at the end of October to solidify his mandate, which includes a new fiscal stimulus package and maintaining highly accommodative monetary policy.
Flows accelerated into Japan-related ETFs in September, with nearly half of year-to-date inflows coming in the last two weeks of the month. Still, the inflows were not heavy enough to suggest strong conviction in the rally, at least for now.
Beyond the political changes, investors may be positioning for an economic reopening. Vaccinations in Japan have overtaken the U.S., and new COVID cases are falling. A nationwide state of emergency was lifted late last month, signaling the potential for a continued economic reopening, and creating optimism that pent-up consumer spending will accelerate into year-end.