Japan Nikkei seen hitting new maximums like yen, ties collide in Takaichi’s victory

By Rocky Swift

The Japanese actions of Tokyo (Reuters) are expected to continue establishing records even when the country’s currency and bonds collide after the Sanae Takaichi fiscal dove was elected on Saturday to lead the ruling party and probably become prime minister.

It was considered that Takaichi, 64, had the most expansionist fiscal and monetary agenda among five candidates in the career of the Democratic Liberal Party to replace the aggressive prime minister Shigeru ishiba.

In the period prior to the LDP race, a “Takaichi trade” emerged, a long time in actions and bassists in the Japanese government bonds, particularly the longest maturities, positioning for a victory of Takaichi, a devout of the “abenomic” stimulus policies of the late Shinzo Abe.

‘Positive surprise’ for shares, Bonds on Edine

Japan’s reference, Nikkei, registered a record of a maximum of 45,769.50 on Friday, exceeding the record established the previous week, since investors bet those who happened to Ihiba would be more misleading.

Short positions in the indicator have been accumulating recently and now they may not be ready, said Resonns Holdings Hiroki Takei strategist.

“This could be considered a positive surprise for actions prices,” said Takei. “If the short cost is activated, the rally could gain impulse, potentially pushing the index towards the level of 47,000”.

The Japanese government bond market has been nervous since the end of May due to diminishing demand among traditional buyers, the decrease in the support of the Central Bank and concerns about swelling debt.

The sector received another coup in July, when the ishiba’s coalition lost its majority in the upper house of Parliament, after having lost its majority of the lower house last year, such as external parties that campaign in tax cuts and an increase in expenses won.

The 30 -year -old JGB yield increased to a record of 3,285% on September 8, the first day of negotiation after Ishiba announced that I was renouncing.

In recent weeks, Nikkei’s impulse slowed down and the long -term JGB recovered when the markets gave the advantage in the LDP race to cultivate Minister Shinjiro Koizumi and Takaichi seemed to moderate their position, leaving the sales tax cuts of their platform and remaining mostly mother on the shore of Japan.

“It seemed to have attenuated its rhetoric, but ultimately, the sensation remains that it will press for a more loose fiscal and monetary policy,” said James Athey, fixed income manager of the Marlborough British investment group. “As such, it is likely that there is a negative reaction in long -range JGBs and the yen.”

The Japan currency closed to 147.44 per dollar on Friday, organizing a gain of 1.4% in the week that was the most acute since mid -May.

After his LDP victory, Takaichi said at a press conference that the Government and the Central Bank must work closely to ensure that Japan’s economy achieves inflation driven by the demand backed by the increase in wages and corporate profits.

The prices of the shortest date, the most sensitive to the rates of the central banks, have been in a decline trend, which increases their yields as the evidence increased that Japan’s economy was solid enough for the bowl to resume adjustment policy.

The governor of Boj, Kazuo Ueda, has put the Central Bank on a long -term road to increase interest rates and reduce its general balance after more than a decade of mass stimulus that was a key part of the economic platform of former Prime Minister Abe.

The yields of the JGB of two, five and 10 years have reached levels not seen from the financial crisis in 2008 in the bets that the BC could increase the rates as soon as in the meeting this month.

Takaichi’s broad support among Range LDP members will give his cabinet a strong mandate and a heavy hand to influence monetary policy by Boj, said Tohru Sasaki, Chief Strategy of Fukuoka Financial Group and a former Boj official.

“Takaichi will make it difficult for the BOJ to increase the rates, so the yields will decrease,” said Sasaki. “But at the same time, it is likely to expand spending, which is negative for links. A venture of the performance curve is a possible reaction.”

(Rocky Swift report in Tokyo; Additional reports of Ankur Banerjee in Singapore; William Mallard edition)