Japanese shares slumped to a four-week low despite the thumping new mandate delivered to prime minister Shinzo Abe in his snap election yesterday.
The Nikkei shed 1.6% to close at 17,099, its lowest since November 17 as the Japanese public gave the reflationist Prime Minister’s Liberal Democratic Party a landslide victory in the general election.
The broader Topix index dropped by 1.5%, with the shares of exporters punished.
Toyota and Mitsubishi lost 2.5% and 4% respectively.
The scale of the challenge facing Abe was underlined by a survey today showing weakness in domestic business conditions.
The headline index of the Bank of Japan’s latest Tankan poll of large manufacturers slipped to 12 in December, down from 13 in September and lower than analysts had expected.
GDP data for the third quarter of the year last week showed a 1.9% annualised contraction, putting Japan back in recession. Consumer expenditure has been hammered by the Abe administration’s decision to proceed with a scheduled increase in the sales tax last April from 5% to 8%.
Abe’s party has secured 290 seats in the House of Representatives, according to preliminary estimates.
That is slightly fewer than in the 2012 election, but with coalition partner Komeito, it will still enjoy a comfortable majority.
Sean Yokota at SEB Bank said the first policy measure of the administration would be to introduce a fiscal stimulus worth 0.6-0.8% of GDP to get growth back on track.
