Japan’s Nikkei 225 is going through a bumpy ride as investors brace for this Sunday’s domestic elections. There’s a buzz that the ruling Liberal Democratic Party (LDP), which has held power for over a decade, might face a shake-up. If the LDP loses its firm hold, a power-sharing deal could be on the horizon, stirring uncertainty in the markets. With the potential for a major political shift, investors are on edge, closely watching how the election results might reshape the landscape.
Potential Implications for Tokyo Stocks
If the LDP and its junior partner, Komeito, see a big drop in seats, it could shake up Japan’s political scene in a big way. A change in power dynamics might lead to a less stable government, adding to the market’s current jitters. This comes at a time when global geopolitical tensions and shifts in monetary policy are already making investors uneasy.
With the election just around the corner, all eyes are on Sunday’s results, knowing they could set the tone for market behaviour in the coming weeks. While some short-term volatility is almost certain, the longer-term effects will hinge on how the political and economic landscape settles after the votes are counted.
Japan ETF Focus
Japan-focused ETFs dipped 2.94% this week, pulling their year-to-date gains down to +8.45%. The hardest hit were the iShares Core MSCI Japan IMI (LON:IMI) UCITS ETF (IJPA) and the Xtrackers ESG MSCI Japan UCITS 1C (LON:XZMJ), dropping 3.12% and 3.31% respectively. Despite the losses, Japanese ETFs still managed to draw in positive flows, with an inflow of +€35 million over the week.