Well, I guess it’s safe to say that investors are willing to look past that silly grade school scandal in Japan for the time being – and when I say “grade school” scandal I mean that literally.
The Nikkei surged some 1.7% to start the week despite concerns about Abe’s political future after the MoF said it altered 14 documents tied to the sale of the land at the center of the Moritomo fiasco.
Both the names of Abe and his wife Akie were removed from those documents. Apparently, Abe’s name came up in reference to an explanation of Japan’s nationalist group Nihon Kaigi and Taro Aso’s name was mentioned right along with Abe’s, but it was removed too.
This absurd story dates back to last year when it became apparent that Abe and his wife probably helped an elementary school with a nationalist bent secure government land on the cheap, only to try and cover up the deal later.
Now it looks like Aso will have to resign. At a press conference, he said he’s real sorry for fucking with the documents related to the sale of the land, but he also said former tax chief Sagawa was the one who’s ultimately responsible – you know, if you’re looking to point fingers.
“This isn’t something Abe should quit over,” Daiwa’s Soichiro Monji said overnight, before suggesting that while “it’ll temporarily cap the upside for Japanese equities,” it “isn’t something that will throw stocks into a downward trend.”
Obviously, folks would be freaked out initially if Abe (or Aso) were forced to resign, but for markets, the main question is what the implications would be for the BoJ.
“The biggest focus for JGB market players is whether BOJ policy will be affected,” Daiwa’s Mari Iwashita says, adding that the Abenomics “is symbolic for Japan” and its collapse would “have a negative impact all-out, putting upward pressure on yields as Abe’s presence was central to BOJ Governor Kuroda’s reflationary monetary policy.”
Aso declined to resign today. “If Aso resigns, the Abe cabinet itself will be in danger, together with much of the momentum for its policy agenda,” Jun Okumura, a visiting scholar at the Meiji Institute for Global Affairs in Tokyo told Bloomberg, noting that “Aso is a political whale” and “his resignation would be much more damaging than that of the relatively junior cabinet ministers that we have seen.”
Abe told reporters in Tokyo that he wants Aso to “take responsibility” for the investigation into the Moritomo documents. Abe also said he “feels responsibility” and he too said he’s sorry.
As you can probably surmise from the above, this is a silly ass mess, but for the time being, stocks don’t seem to care. The Nikkei did trim gains as on the MoF headlines and while it did close off its best levels of the day, it was still a solid session:
As for the yen, it got a shot in the arm from this. Obviously, any threat to Abe is viewed as a threat to the economic policies that bear his name and if those policies are imperiled, well then so is the reflationist agenda.
Don’t worry, he’s got it under control.