Japanese elections Yesterday, Fumio Kishida’s Liberal Democratic Party won an outright electoral majority. The party secured 261 seats, 28 more th
Japanese elections
Yesterday, Fumio Kishida’s Liberal Democratic Party won an outright electoral majority. The party secured 261 seats, 28 more than the 233 needed to govern without a coalition partner. Japan’s Nikkei 225 and TOPIX indices both rose over 2% today, as investors believe that the new Prime Minister can now push through his economic stimulus plans worth trillions of yen.
Kishida is selling his economic policy as the ‘new capitalism,’ while its detractors on social media are likening it to China’s ‘common prosperity.’ One fierce critic, Rakuten’s CEO Hiroshi Mikitani, tweeted ‘Does he even understand how capitalism works?’ He was particularly unhappy with proposals to raise Capital Gains Tax (CGT) amid fears it would halt the rise of retail investors in the country. When Kishida took over as Prime Minister a few weeks ago, Japan’s stock markets fell sharply, forcing him to backtrack on his CGT policy. But with a fresh mandate, the plan could now resurface.
Kishida believes a new economic policy is needed to distribute wealth more fairly in Japan. His predecessors, Yoshihide Suga and Shinzo Abe, pursued ‘Abenomics,’ which consisted of aggressive monetary easing, fiscal consolidation and growth. Overall, Abenomics was successful at growing Japan’s previously sluggish economy. The Nikkei 225 went from 10,000 yen in 2012 to 30,000 yen by February 2021.
However, Kishida contends that Abenomics has only helped to make the rich richer. There’s some merit to this argument — according to the Organisation for Economic Co-operation and Development, average wages in Japan have stagnated compared to the US and Germany. And 10% of the 2,500 companies on the Tokyo stock exchange now have cash and deposits worth more than their market caps.
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