Page 12 - ISQ October 2020

INVESTMENT STRATEGY QUARTERLY

Japan: new Prime Minister, new opportunities?

Chris Bailey, European Strategist, Raymond James Investment Services Ltd.*

“ Living in Europe, I was surprised to

find out just how little everyone
knows about Japan ” – Hidetoshi Nakata

For many years one of the jokes in international investment fiscal year, is a nod towards continued policy largesse. Simi-
circles was ‘who is the Japanese prime minister this month?’ larly Bank of Japan pronouncements have been very much at
However, after over eight years of ‘Abenomics’ under the now a ‘business as usual’ level, reflecting not an institutional inde-
retired Shinzo Abe, a very reasonable question today is pendence but rather a continuing full adherence to forging a
whether the ascension of new prime minister Yoshihide Suga commingled joint policy front with the government.
marks an effective continuation or hints of potential of a
regime shift.
At the centre of next year’s national budget is
Scarred by prior interactions or distracted by new opportuni- a digitisation of government services
ties, many investors forget about the Japanese market which
consistently over recent years has maintained an ‘under-
valued but underowned’ in the world’s biggest regular fund However, some changes are coming. At the centre of next
management survey. For an economy which remains the year’s national budget is a digitisation of government services
second largest in Asia and which still sports the third largest push inspired - apparently - by Japan’s drop in the United
global equity market, this feels like a potential oversight. Nations’ e-government development ranking to fourteenth
place for this year.
Part of this is due to ‘Abenomics’ never really hitting its full
potential, as despite loose monetary and fiscal policy imple- Technology matters for Japan as any visitor to the country will
mented respectively by the Bank of Japan and the Ministry of attest. Whilst other countries grapple with their potential
Finance along with some structural reforms designed to cope demographic time bomb by supplementing extended working
with a fast-aging population, restructuring the banking sector, lives with immigration, Japan has to date preferred to com-
rejuvenating the backdrop for smaller businesses, and bine Abenomics initiatives such as greater adult female labour
updating Japanese production chains. force participation with significant robotisation. For this
policy to not be supplemented by a significant digitisation
Suga is patently a continuation candidate from the perspec- push is a national embarrassment and an unsurprising policy
tive of being an integral part of Abe’s team during the latter’s for the fledgling Suga government to pursue.
prime ministerial period. And from a practical policy perspec-
tive, the newly announced record national budget for fiscal
2021 of 105 trillion yen (almost one trillion dollars equivalent)
along with a potential supplementary budget in the current

*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.

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