(Bloomberg) -- Japanese shares soared one month ago as outgoing Prime Minister Yoshihide Suga announced he'd be stepping down, spurring hopes for a new administration. As his successor prepares to take power, the aspirations and stock gains alike are drying up.
In the last day of trading before Suga's replacement Fumio Kishida is formally sworn in on Monday, the Topix index and the Nikkei 225 both fell below their closing levels on Sept. 3, the day Suga shocked the market.
While there are many external factors for the drop, including U.S. yields, an energy crunch and the Evergrande debt crisis, market disillusionment with the uninspiring choice of Kishida is compounded by reports of his selection of Cabinet members. They indicate appointments are being made to keep internal factions happy, rather than please the public.
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“These appointments don't feel very fresh,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities Co. “Stocks rose on anticipation for the leadership vote, but don't look like they'll be too excited going forward.” He cited investor concern for redistribution of the fruits of economic growth.
Nonetheless, Japanese equities still outperformed peers during that time. While the Topix has lost 1.5% since the day Suga resigned, that's a better return than the MSCI ACWI Index of global shares, which has lost 5.3%. Many analysts expect that the forthcoming general election will help to drive equities back up, along with the economic reopening that begins today with the end of a state of emergency.
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