Following the Japanese government's proposal of Asada Toichiro (浅田統一郎) and Sato Ayano (佐藤綾野) as candidates for the Bank of Japan Policy Board, the view that Japanese equities will remain in a positive phase is gaining ground. Banks, however, face short-term headwinds. The editorial-source analyst has outlined the impact of appointing reflationists on market trends.
On 25 February, the Japanese government presented Asada Toichiro (浅田統一郎) and Sato Ayano (佐藤綾野) to the Diet as candidates for the next members of the Bank of Japan Policy Board. The Nikkei Stock Average responded by rising ¥1,262.03 from the previous day to ¥58,583.12, setting a new record high. A Nomura Securities strategist outlined the possibility that the appointments could create a positive phase for Japanese equities.
Against a “G>R” backdrop, Japanese equities are expected to remain on a bullish trajectory, with views that the inflation outlook and rate-hike momentum are unlikely to stall. Banks, meanwhile, are expected to face short-term headwinds, and their performance could change depending on how the rate-hike cycle develops.
In terms of research-related ties, Wakatabe Masazumi (若田部昌澄), former Deputy Governor of the Bank of Japan, and Honda Etsuro (本田悦朗), former Special Adviser to the Cabinet Secretariat, are said to have close ties to the candidates listed above, making the appointments likely to attract market attention. The view was expressed that actual policy management will proceed through dialogue with the Minister of Finance, the Governor of the Bank of Japan and others, as well as with the market.
On the other hand, if the Mainichi Shimbun report dated 24 February is accurate, market expectations for rate hikes are unlikely to accelerate, potentially creating short-term headwinds for banks. It was also noted that many reflationists are generally supportive of rate hikes in line with inflation, and that a steeper yield curve could support the phase for insurers and value stocks over the longer term.