As Japan's longest-serving prime minister, Abe confirmed reports on Friday that he intends to resign due to deteriorating health. Abe, who has served as prime minister for nearly nine years, has been fighting ulcerative colitis for many years. Abe said that his health began to deteriorate around mid-July. Abe, 65, apologized to the Japanese people, saying that he would resign once the ruling Liberal Democratic Party officially appointed a new leader.
As investors responded to the preliminary report of Abe's resignation, the Nikkei 225 Index closed down 1.4% and the Dongzheng Index closed down 0.7% on August 28. After the news was confirmed, the yen, as a "safe harbor", rose, and the USD/JPY fell 1.13% to 105.4.
Since 2012, Abe has been trying to revive Japan's sluggish economy through a policy called Abenomics. He said last Friday that economic policies have successfully promoted employment and ended deflation for 20 years.
Now, despite Abe's departure plan, analysts expect Japan's inflation policy to continue.
Mccallum, interest rate strategist at Mizuho International, said on Friday: "Although Prime Minister Abe announced his resignation, the Abenomics framework and the Bank of Japan's monetary policy may remain unchanged. We believe that the Nikkei 225 Index has little room for further growth, and investors are not recommended to sell Japanese bonds after the announcement of this news, although the weakness of Japanese government bonds may continue until the new prime minister takes office. "
Robert Carnell, Asia-Pacific research director of ING, said in a research report that there is still a lot of work to be done to pull Japan out of the economic recession caused by new crown pneumonia. Obviously, it is a difficult time to change the prime minister. The large-scale financial, monetary support and economic reform of Abenomics may not achieve all its goals, but it is not a complete failure. Japan has made some important progress under his leadership.
Critics of Abe's iconic economic policy believe that the outgoing prime minister failed to carry out lasting reforms to the Japanese economy, which was dragged down by low productivity and aging population. Abe's resignation has little impact on the economy, and there is uncertainty about how the political situation evolves. Abe resigned as prime minister in 2007 due to the worsening of his illness. In 2012, after his Liberal Democratic Party (LDP) won the general election overwhelmingly, Abe served as Prime Minister of Japan.
His resignation will trigger a contest for the leadership of the Liberal Democratic Party, and the winner will formally participate in the election of Prime Minister in Congress. Abe's successor will take over the remaining term of Abe, and the next general election in Japan will be held on or before October 2021.
Martin Schulz, chief economist of Fujitsu Research Institute, said on the program last Friday: "We don't know who will succeed Shinzo Abe in September, so obviously the policy is still pending. But what we know is that Abenomics owned by Japan, that is, a very strong quantitative easing monetary policy, a loose fiscal policy, and even a vigorously promoted fiscal policy, and subtle micro-reforms are almost 100% likely to continue. "
Martin Schulz added: "I don't think we will carry out large-scale restructuring or any major structural reform, which may be a risk. Therefore, Japan will maintain its current economic policy, but we don't know how the Japanese political situation will develop. "
In response to Abe's decision to resign, Tom Learmouth, a Japanese economist at Capital Economics, said: "This has little impact on the Japanese economy."
He admitted that when Abe abdicated, Abenomics probably ended only in name, because his successor is expected to come from within the ruling Liberal Democratic Party.
Tom Learmouth pointed out in a research report that Abe is unlikely to seek the fourth term as leader of the Liberal Democratic Party after September next year, given the record low public support rate for his cabinet. Considering the weakness and dispersion of the opposition party, the new leader of the Liberal Democratic Party and the successor of the Prime Minister should be able to easily win a majority in the next general election.
According to the latest reports from Japanese local media, Chief Cabinet Secretary Yoshihide Suga will compete for the position of Prime Minister, and the competition for Shinzo Abe's successor is heating up. Other candidates include former Foreign Minister kishida fumio and former Defense Minister Shi Pomao. According to media reports, former General Affairs Minister Seiko Noda and former Defense Minister Tomomi Inada are also interested in seeking to become the first Japanese female prime minister.
It can be seen from the above news that analysts believe that Abe's resignation has little impact on Japan's economy, and the market response to his resignation will be short-lived. Abenomics is likely to continue, and investors should pay attention to the election of Japan's next prime minister in the future.
The news of Shinzo Abe's resignation last Friday pushed the safe-haven yen to rise sharply. The USD/JPY once hit a low of 105.20 for more than one week, and is currently trading around 105.57. It is necessary to pay attention to the telephone conversation between Shinzo Abe and US President Trump in the day. If the market is worried about the stability of US-Japan relations, there will still be some downside risks in the short-term USD/JPY.