Stock Market Fired Up by 'Suga'... Domestic Japan ETF 'Stirred'

Suga Declines Re-election as Japan's Prime Minister
Japanese Stock Market Hits Record High
Domestic Listed Japan ETFs Also See Gains

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hwang Junho] Following Japanese Prime Minister Yoshihide Suga's announcement that he will not seek re-election, the returns of Japan-listed exchange-traded funds (ETFs) listed domestically have surged sharply.

According to the Korea Exchange on the 7th, the KINDEX Japan TOPIX Leverage ETF closed at 22,470 KRW, up 2.36% from the previous session. It rose 3.55% over two trading days since the announcement on the 3rd. The TOPIX index, which is similar to Korea's KOSPI index, rose 1.61% the previous day, reaching an all-time high for the first time in 31 years since August 16, 1990, during Japan's economic bubble period. Thanks to this, the returns of ETFs tracking this index also increased.

The domestic ETFs following the Nikkei 225 index showed similar trends. This index rose 2.05% the previous day, marking its highest level in two and a half months. Accordingly, ETFs tracking this index, such as the ‘TIGER Japan Nikkei 225,’ also saw returns increase by 2.01%. This is the first time since March 22 (4.76%) that the daily return of this ETF has exceeded 2%.

This upward trend is analyzed as a reflection of improved policy transparency and expectations for the new prime minister. On the 3rd, Prime Minister Suga announced that he would not run in the ruling Liberal Democratic Party leadership election, effectively declaring his resignation.

Moon Namjung, a global strategy researcher at Daishin Securities, predicted, "If the momentum of expectations for active fiscal expansion by the new administration acts ahead of the political schedule for selecting a new prime minister, the upward trend will continue until the end of the year." However, he also analyzed, "Temporary volatility is inevitable due to variables that are bound to arise, such as the spread of COVID-19 and economic losses related to the Tokyo Olympics."