Likely end to 'Abenomics' rattles Japan markets
Japanese shares tumbled Friday (August 28) on the news that Prime Minister Shinzo Abe will resign.
The Nikkei share index dropped as much as 2.65%, before closing down by just over 1.4%.
Japan’s longest serving premier said he was stepping down over health concerns after almost eight years in the job.
"I needed to fight against the disease and be treated and I was not really in a perfect state in terms of health and still I had to make important political decisions. .”
Investors fear his departure will mean an end to the mix of aggressive monetary and fiscal stimulus dubbed ‘Abenomics’.
Aided by close collaboration with the central bank, that helped revitalise Japanese shares.
The Nikkei hit 27-year highs in 2018.
Japan-watchers say the impact on the economy is more mixed though.
The Bank of Japan’s huge stimulus programmes lifted business sentiment and helped exporters by weakening the yen.
Corporate governance reforms encouraged foreign investors to pour money into Japanese stocks.
But structural reforms to tackle weak productivity, an aging population and rigid labor markets never really materialised.
Now the global health crisis may be undoing what gains Abe did achieve.
Japan posted its worst ever economic contraction in the second quarter.
And the country’s huge public debts limit the government’s ability to respond.
Even so, investors welcomed the stability Abe brought to Japan’s top job after so many short-lived predecessors.
Friday’s market wobble suggests many worry what might come next.
