Tokyo, Japan skyline.
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Japanese Nikkei 225 Index Japan released a slew of mixed economic data on Monday, with stocks falling more than 4% as traders reacted to the election of incoming Prime Minister Shigeru Ishiba.
Japanese August retail sales Year-on-year growth of 2.8% exceeded the 2.3% forecast in a Reuters poll and was higher than the revised 2.7% in July.
Ishida defeated Economic and Security Minister Sanae Takaichi in the final round of the Liberal Democratic Party’s election on Friday, sending the yen into volatility.
Ryota Abe, an economist in the global markets and finance department at Sumitomo Mitsui Banking Corporation, told CNBC that this means the Bank of Japan “will not face any political obstacles” to further raising interest rates.
Higher interest rates typically push up the yen and weigh on Japanese stocks, which are heavily weighted toward exporters. A stronger yen will make its exports less competitive.
this JPY The greenback weakened against the U.S. dollar early on Friday as Takaichi won the first-round vote, but later reversed course and strengthened as Ishiba won the runoff vote after the market close.
Abe noted that the yen had reversed course “as almost all market participants, including SMBC and other political analysts, expected Ms. Takaichi to win in the second round of voting.”
He added that Takayama is an advocate of lowering interest rates and has made it clear that it will not support the Bank of Japan’s policy of raising interest rates to stimulate economic growth.
Steven Glass, managing director at Pella Funds Management, took a different view, telling CNBC’s “Squawk Box Asia” that inflation is largely due to a weak yen. The above is still “input”.
Because of this, he added, it “doesn’t make sense” for the Bank of Japan to raise interest rates, and he also believed that Ishiba’s tenure as prime minister “strengthens our resolve at the Bank of Japan not to raise interest rates.”
industrial production on monday Japan’s annual decline was 4.9% in Augustdown 0.4% from last month.
On a month-on-month basis, industrial production fell by 3.3%, which was greater than the 0.9% decline expected in a Reuters survey and higher than July’s growth of 3.1%.
China rebound brings pressure
Monday’s decline in the Nikkei also came amid a surge in Chinese markets. On Friday, mainland China’s CSI 300 Index recorded its best weekly performance since 2008, and Hong Kong’s Hang Seng Index recorded its largest weekly gain since 1998.
On Monday, China’s official Purchasing Managers’ Index for September was 49.8, and the CSI 300 Index rose more than 6%, leading Asian stock markets higher. The contraction was smaller than the 49.5% expected by economists polled by Reuters.
Britney Lin, portfolio manager at Magellan Capital, pointed out that the Japanese market has always been viewed as “anti-China trade.” In other words, when the Chinese market does poorly, the Japanese market does well.
China’s central bank launched a series of stimulus measures last week, including lowering banks’ reserve requirements and lowering short-term interest rates. On Monday, the People’s Bank of China also said a mortgage rate cut announced last Monday would take effect at the end of October.
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