Skepticism Over Kishida's Policy Dims Tokyo Stocks Outlook

The Tokyo stock market is expected to struggle to sharply rebound from its recent plunge as the economic policy of new Prime Minister Fumio Kishida adds to concerns over the post-pandemic growth outlook, Toma Mochizuki reported for Kyodo News.

Photo Insert: Inside the Tokyo Stock Exchange

The benchmark 225-issue Nikkei Stock Average has dropped 8.5% from a 31-year high marked in mid-September to end at 28,048.94 on Friday. The market was rattled by China Evergrande Group's debt crisis and rising long-term U.S. Treasury yields coupled with higher oil prices.

Market analysts say the key index is not likely to dip below this year's closing low of around 27,000, helped in part by approval Thursday by the US Senate of legislation to temporarily raise the federal government's debt limit and avoid the risk of default.

Still, the prospect that the downside will be relatively limited does not signal a quick rally unless market participants are fully convinced of what the new premier is seeking to do to rejuvenate the pandemic-stricken economy, analysts say.

Masahiro Yamaguchi, head of investment research at SMBC Trust Bank, said that while the recent sell-off is running out of steam, "the market is currently not in a situation to climb to new levels" either.

Since Kishida won the leadership of the ruling Liberal Democratic Party on Sept. 29, the Nikkei has slid 5.1 percent, with the eight-day losing streak through Wednesday -- the longest since July 2009 -- dubbed by some the "Kishida Shock" on social media.

He was elected prime minister Monday at an extraordinary parliamentary session. A market slide is rare for a new prime minister, with expectations typically strong for a new leader to take drastic measures to entice voters.

Kishida, who is preparing for a snap election in the coming weeks, has said he will aim for growth through "aggressive monetary easing, flexible fiscal spending and a growth strategy," similar to the economic model of his predecessors Yoshihide Suga and Shinzo Abe.

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