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Janus Henderson: Abe’s election a victory for Japanese stocks

Yunyoung Lee, Japanese Smaller Companies portfolio manager, provides his views on Shinzo Abe’s solid victory in the recent snap election and its implications for Japanese equities.

Japan’s ruling Liberal Democratic Party (LDP) and coalition partner Komeito have secured a two-thirds majority in the lower house, giving Prime Minister Shinzo Abe’s government a solid base to continue to tackle a myriad of challenges including economic, political and social issues. 

An extended term limit for LDP party leaders was approved in March, meaning Abe could serve a third consecutive three-year term as LDP President until September 2021 if he wins another party leadership election next year. Given the strong mandate win, Abe now looks to be on track to become the longest-serving prime minister in Japanese history. The longest-serving prime minister since World War II was Eisaku Satō, who held office for 2,797 days between 1964 and 1972. The high turnover rate of Japanese heads of government has been attributed to the weakness in the economy; between 1993 to 2012 there were 18 cabinets and 13 prime ministers. A third consecutive three-year term will enable a continuation of ‘Abenomics’, which should benefit both economic growth as well as Japanese equity markets.  

Overall, we think Abe’s victory is a big positive for Japanese equities and our investment approach. We seek to invest in smaller companies that are actively improving corporate governance standards and rewarding shareholders. These characteristics have greatly improved since Abe’s introduction of a corporate governance code in 2015, and look set to be a continuing trend. 

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