Japan's 'Takaichi effect'... Stock market surges, yen plunges

Korea Economic Daily

Summary

Reported that Sanae Takaichi signaled fiscal expansion and monetary easing, causing the Japanese stock market to surge.
Said that as views grew that the Bank of Japan would find it difficult to pursue additional rate hikes, the yen's value plunged.
The securities industry forecast that the Nikkei could reach 50,000 within the year.

First female prime minister to take office in mid-month

Fiscal expansion·monetary easing signaled

Offshore won·dollar jumps 24 won

The ruling Liberal Democratic Party, reduced to a 'minority ruling party' after successive electoral defeats, chose hardline conservative female politician Sanae Takaichi (64·photo). Takaichi, who won the party leadership election on the 4th, is expected to be inaugurated as Japan's first female prime minister following a parliamentary prime ministerial nomination vote in mid-month. With Takaichi's emergence, who heralded 'Abenomics Season 2' through fiscal expansion and monetary easing, the Japanese stock market surged and the yen plunged.

Since Takaichi was elected party leader, the Japanese stock market has been in a continuous rally. On the first trading day after the election, the Nikkei rose 4.75% from the previous session, breaking 47,000 for the first time, and on the 7th it closed at 47,950, up 0.01%, again setting a record high. It fell 0.45% on the 8th to take a breather, but the securities industry forecast that the Nikkei would reach 50,000 within the year.

The yen–dollar exchange rate shot up (yen value plunged). On the 6th it exceeded 150 yen to the dollar for the first time in about two months, and that day it even surpassed 152 yen for the first time in about eight months. As expectations grew that the Bank of Japan would find it difficult to raise its policy rate further this month, yen selling spread.

According to Bloomberg, on the 8th in the New York non-deliverable forward (NDF) market, the one-month won·dollar contract rose as high as 1,422 won 37 jeon. Considering the recent one-month swap point (-2 won 5 jeon), this is more than 24 won higher than last weekend's weekly closing transaction price in the Seoul foreign exchange market (1,400 won).

Takaichi, known as a 'hawk' on diplomatic and security policy, is expected to become Japan's prime minister in mid-month, raising concerns that uncertainty in Korea-Japan relations has increased. Junya Nishino, a professor in the Department of Political Science at Keio University, said, "The key is building a relationship of trust with President Lee Jae-myung at the Korea-Japan summit at the end of this month."

Tokyo=Correspondent Kim Il-gyu/Reporter Lee Kwang-sik black0419@hankyung.com