Japan’s recent snap election has resulted in a super majority for Prime Minister Sanae Takaichi and the Liberal Democratic Party (LDP) in the lower house. This outcome is expected to pave the way for stimulatory spending and dovish fiscal measures, positively influencing the Japanese economy. Betashares investment strategist Hugh Lam believes this victory gives the “Takaichi trade a fresh boost.”
Lam suggests that the anticipated looser fiscal policy is likely to support GDP growth and corporate profits, particularly benefiting export-oriented companies such as Toyota, Mitsubishi, and Hitachi. Furthermore, the potential removal of the sales tax on food could stimulate consumer demand. Japanese stocks are constructively positioned after consolidating following Takaichi’s election in October, while currency movements are also providing support.
According to Lam, the structural weakness in the Japanese yen favours export-oriented companies. He notes that currency hedging in the current environment would benefit Australian investors, with the AUD-JPY cross rate reaching new cycle highs. However, Lam also cautioned that a weaker yen could complicate the Bank of Japan’s policy, with cost-push inflation and Japan’s high debt-to-GDP ratio likely to keep government bonds under pressure and long-term yields rising modestly.
BetaShares is an Australian fund manager offering a range of exchange traded funds (ETFs). They provide investors with access to various markets and investment strategies, including those focused on international equities and currencies.
