Columbia Threadneedle: Japan: all eyes on the next Prime Minister

Post-Abe economic policies and recent structural reform probably remain unchanged. Near-term volatility presents buying opportunities for investors.

Following an eight-year term, Shinzo Abe announced he will stand down as Prime Minister of Japan due to a deterioration in his physical health. Japan’s Topix Index dropped around 2.5% in reaction to the news on 28 August 2020, before rebounding to close the day marginally negative. In the short-term we can expect downward pressure on the domestic equity market, while the yen appreciation as a result of political uncertainty will act as positive for non-JPY based investors. In the event of a broad-based sell-off in Japan’s equity market, we believe this will present a buying opportunity for long-term investors like us to purchase quality businesses at an attractive price.

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