Prime Minister Kishida Shouted Investment Instead of Saving, Strategy Unrest

Photo by Kishida at the Japanese Prime Minister’s Office

As the Japanese stock market has been exposed to rapid volatility, Prime Minister Fumio Kishida’s “re-election strategy” ahead of the ruling Liberal Democratic Party presidential election next month has also turned on a red light. This is because Prime Minister Kishida’s “asset management entry” economic policy, which focused on investment at a time when he was under pressure to step down due to his already low approval rating, could face a headwind. In Japan, a parliamentary cabinet system, the president of the ruling party becomes the prime minister.

The Nikkei 225 index closed at 34,675.56 yen on Thursday, up 321.04 yen (10.23 percent) from the previous day. The Nikkei average, which recorded the biggest drop in the Japanese stock market (4451 yen) the day before and the second decline (12.4 percent) following the “Black Monday (14.9 percent)” on Oct. 20, 1987, turned upwards and soared 10.97 percent to 34,911.8 yen during the day. Investors who were worried about the fall of all three major indexes in the New York Stock Exchange breathed a sigh of relief, but the sudden change in the index’s flow over the course of a day is worrisome.

Nikkei Stock Exchange of Japan

Analysts say that the plunge in stock prices could be a rock for Prime Minister Kishida, who is seeking re-election in the next month’s Liberal Democratic Party (LDP) presidential election. The Kishida administration has been emphasizing a shift from savings to investment by expanding the “small investment non-taxation system.” Thanks to the Japanese government’s aggressive policies, the number of NISA accounts stood at 15.2 million as of the end of June, up 30 percent year-on-year. While it played a positive role by giving momentum to inflow of funds to the stock market during the period of rising stock prices, individual investors continued to suffer losses in the unexpected plunge. The Asahi Shimbun reported that Prime Minister Kishida’s plan was to maximize economic performance in the September election, with her approval rating at an all-time low (in the early 20 percent level). “However, if the stock price declines, the arrow of criticism will focus on the administration that has been at the forefront of the shift from savings to investment.” The uncomfortable mood is also felt within the LDP. “The administration’s advantage in economic policy, which was well received by the public, has disappeared,” a mid-sized politician from the Aso faction of the Liberal Democratic Party said. “The Kishida administration is in a more tight spot.” Criticism poured in over the timing of the Bank of Japan’s rate hike. The sharp rise of the yen, which started after the central bank decided to raise the interest rate late last month, has accelerated the decline in stock prices. Critics say that the hike was a mistake due to poor understanding of the economic situation, and some even suspect that political pressure was involved. In fact, high-ranking officials of the Liberal Democratic Party made public remarks urging the central bank to raise the interest rate ahead of its July meeting. “It can only be interpreted as the result of communication between the political circle and the Bank of Japan to cope with the weak yen,” said Atago Nobuyasu, a former researcher at Rakuten Securities’ Economic Research Institute. “However, current consumption and production indicators are too weak to justify a rate hike.” Opposition parties are increasing their offensives against the government. Kuenta Izumi, chairman of the Constitutional Democratic Party, is raising the level of offensives, saying, “We need an explanation from Kazuo Ueda, governor of the Bank of Japan, and government officials along with holding a National Assembly Budget Committee meeting.” Meanwhile, the heads of both the Liberal Democratic Party and the Constitutional Democratic Party agreed to hold a “duration review” this month at the Finance Committee of the House of Representatives, and asked Ueda to attend the meeting to hear explanations on the rate hike.

SOPHIA KIM

US ASIA JOURNAL

spot_img

Latest Articles