Japanese stocks:Japanese stocks rose on Monday as the yen fell to a three-month low after Prime Minister Shigeru Ishiba’s coalition lost its parliamentary majority in a defeat in Sunday’s election, raising uncertainty over the path of politics and economy.
Ishiba’s Liberal Democratic Party (LDP), which has ruled Japan for almost all of its postwar history, and its junior coalition partner, Komeito, won 215 seats in the lower house of parliament, fewer than the 233 needed for a majority. . Previously, the LDP had 247 seats and Komeito 32.
The result may force parties to sign conflicting power-sharing agreements to govern, which could lead to political instability.
He Nikkei The stock average .N225 ended the day up 1.82 percent at 38,605.53 after rising as much as 2.2 percent. It opened down 0.4 percent.
The yen accelerated its declines during the morning session, falling as low as 153.885 per dollar JPY=EBS for the first time since July 31. At 0600 GMT, it was trading around 0.8 percent lower at 153.505 per dollar.
“The election result itself is negative for the stock market, no doubt, due to increased political uncertainty,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.
“However, the rally is partly due to the fact that this big risk event is now behind us, so there is a sense of relief. That and the weaker yen.”
A weaker currency benefits Japan’s big exporters by inflating the value of overseas sales. It also makes Japanese stocks cheaper for foreign investors.
The transportation equipment sector .ITEQP.T was the best performer among the 33 industry groups on the Tokyo Stock Exchange, with a jump of 3.5 percent. Toyota 7203.T rose more than 4 percent and Nissan 7201.T rose 3.5 percent.
Chip sector stocks also outperformed, tracking gains among their U.S. peers since Friday. Chip testing equipment maker Advantest 6857.T soared 4.6 percent.
“I don’t expect the rally to continue,” said Norihiro Yamaguchi, senior Japan economist at Oxford Economics.
“The stock market is likely to remain lackluster until political uncertainty clears up,” he said. “I would expect bond yields to remain high as concerns about looser fiscal management intensify.”
10-year Japanese government bond futures 2JGBv1 fell 0.19 yen to 143.87 yen, reversing an early rise.
The yield curve steepened, with the two-year JGB yield JP2YTN=JBTC rising 0.5 basis points (bps) to 0.45 percent, while the 30-year yield JP30YTN=JBTC gained 5 bps up to 2.22 percent.
The 10-year yield JP10YTN=JBTC added 2.5 basis points to 0.97 percent.
The election result drew market attention to the political stance of opposition parties that could become potential partners, many of whom favor low interest rates.
The coalition’s losses could reduce the chance that the next government will implement “more challenging agenda items, such as raising the corporate tax rate,” Morgan Stanley analysts said in a note.
BNY analysts said the dollar could potentially rise to 155 yen again as the BOJ downplays the immediate need for a rate hike. The central bank will next decide its policy on Thursday, with no changes expected.
Japan’s general election comes nine days before votes are counted in the tight U.S. presidential race, with investors weighing the possibility of a rising dollar and higher yields in the event of another Donald Trump presidency and a Republican victory in the Senate. and the House of Representatives.
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