Japan corporate winners and losers after Shinzo Abe's landslide victory

Japan's Prime Minister Shinzo Abe, who is also leader of the Liberal Democratic Party (LDP), attends a news conference at LDP headquarters in Tokyo, Japan, on Oct 23, 2017.
Japan's Prime Minister Shinzo Abe, who is also leader of the Liberal Democratic Party (LDP), attends a news conference at LDP headquarters in Tokyo, Japan, on Oct 23, 2017. PHOTO: REUTERS

TOKYO (BLOOMBERG) - The landslide victory in Japan for the party behind Abenomics is likely to be good news for industries from nuclear power to defence, while posing challenges to retailers and others.

Prime Minister Shinzo Abe's ruling coalition retained its two-thirds majority in the lower house in Sunday's (Oct 22) election, paving the way for more ultra-easy monetary policy that has boosted Japanese stocks to the highest level in two decades and helped Asia's second-biggest economy expand for six straight quarters.

At the same time, pressure is growing for Mr Abe to increase stagnant wage growth and overhaul the labour market to replenish a rapidly ageing workforce.

"Corporate Japan is determined to play a role in rebuilding our economy and is cooperating with the Abe administration's strategy," chairman Sadayuki Sakakibara of Japan's main business lobby Keidanren said in a statement.

Here's what the election results mean for key industries and companies.

LARGE EXPORTERS

Mr Abe won office in 2012 with a central bank policy of massive quantitative easing that pushed the yen lower. The currency has weakened from a 2011 peak and provided a tailwind for many of the countries' biggest manufacturers such as Toyota Motor.

Corporate profits have been boosted by a resurgence in Japanese exports, which have shown double-digit gains in the past three months. Some of the companies that stand to gain the most from a depreciating yen include Fanuc, Canon and Nintendo, as most of their sales come from overseas.

The question going forward is how long the government will continue its stimulus plans. With inflation still weak and wage growth still sluggish, Bank of Japan Governor Haruhiko Kuroda has been staying the course with its massive monetary easing programme.

CONSUMER GOODS

Mr Abe also billed the snap election as a chance to test public opinion on an increase in the national sales tax. When he raised the levy in 2014, the economy tipped into recession. Mr Abe has twice since put it off but recent signs of growth make it hard to justify a further delay.

In the election campaign, Mr Abe linked an envisioned increase in the levy to 10 per cent from 8 per cent in October 2019 to planned spending on education and support for young families. That may help companies including education-related publisher Benesse Holdings and cram-school operator Gakken Holdings.

Retail and consumer giants such as Seven & i Holdings, Aeon, and Kirin Holdings may suffer as higher taxes undermine consumer spending.

DEFENCE

Mr Abe campaigned on his administration's record in responding to missile tests and militant rhetoric from North Korea. This has prompted expectations his administration intends to maintain increases in spending on weapons made by companies including Mitsubishi Heavy Industries, Kawasaki Heavy Industries, Toshiba, and IHI.

NUCLEAR POWER

Mr Abe has vowed to restart more reactors after the nation's atomic fleet was idled for safety checks following the 2011 earthquake and tsunami that caused a triple meltdown at the Fukushima Dai-Ichi nuclear power station.

Mr Abe's win on Sunday came against the party of Tokyo Governor Yuriko Koike, who has said she backs eliminating nuclear power and increasing the use of renewable energy sources.

Kansai Electric Power and Kyushu Electric Power remain the most dependent on nuclear power, while industrial conglomerates such as Hitachi and Mitsubishi Heavy are major suppliers to the industry.

TOBACCO

Mr Abe's party has said it is considering raising taxes on electronic tobacco products, while leaving levies on conventional cigarettes at current levels. Former monopoly Japan Tobacco has lost ground to overseas rivals Philip Morris International and British American Tobacco, which have taken the lead in Japan's fast-growing market for heat-not-burn smoking.

Meanwhile, the ruling Liberal Democratic Party has so far balked at proposals to ban smoking indoors ahead of the 2020 Olympic Games in Tokyo.

CASINO LEGISLATION

An Abe victory is good news for companies like Las Vegas Sands and Melco Resorts & Entertainment, which are jostling for position as the government moves towards allowing casino resorts in Japan. The prime minister has supported the initiative as a means to boost the domestic economy. A substantial loss of seats in the election to the opposition could have emboldened critics of the casino plan, which surveys show is unpopular with voters.

The election itself has delayed until next year the submission of legislation laying out rules for gambling resorts. Legislators will probably hold off on submitting the bill until May or June, a government official with knowledge of the plans said last month. Casinos in Japan are not likely to open before 2023, according to Bloomberg Intelligence.

 

 

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