Japan stimulus: $116bn boost fails to fire fund managers

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Prime Minister Shinzo Abe’s announcement of yen 10.3 trillion ($116 billion) financial stimulus package for Japan is a largely positive move but top fund managers have dismissed its overall impact on investment plans.

Abe returned to office in December with economic performance being at the heart of his political ambitions and on Thursday he announced the stimulus initiative aimed at boosting GDP growth by 2% and creating 600,000 jobs.

While the measure has been welcomed in the fund industry as being positive for investor sentiment, there is a large belief that it is a purely political play which will have limited bearing on the strategies of leading fund managers.

Commenting on Abe’s announcement, Euro Stars A-rated manager Albert Abehsera, who runs three Japanese equity portfolios, told Citywire Global there were greater political than investment implications for the move.

‘The stimulus is no surprise and I expect more of these types of initiatives to be implemented prior to the Upper House elections in the summer which the LDP are obviously keen to win.’

His comments were echoed by Paul Chesson, the former Euro Stars A-rated manager, who said Abe made the decision with one eye on obtaining a majority in the Upper House elections.

‘These measures are not going to fundamentally change the focus or the reasons why we are positive. We have got to look at why these things are happening from a purely political point-of-view as well.

‘Mr Abe doesn’t have a majority there at the moment and he wants one. So he is going to use all of his economic strategy and policies in order to get one. These are issues that are politically positive but do not lead to fundamental change.’

Chesson, who runs the Invesco Japanese Equity Core and Invesco Perpetual Japan funds, added that the announcement was good for confidence but had been largely expected by those in the Japanese investment community.

‘These things will help sentiment and we can see the stock market reaction since Mr Abe came back to power that people are starting to re-evaluate Japan,’ said Chesson.

‘But our reasons for being positive are far more based on things like the US economy showing sustainable signs of growth and the Chinese economy having bottomed out and starting to show signs of life again. So we think these are more sustainable reasons to be positive on Japanese stocks.’

In a similar vein to Chesson and Abehsera, former Euro Stars AA-rated manager Neil Edwards – who co-manages the recently reopened €883.7 million GLG Japan CoreAlpha fund – showed little shock at Abe’s announcement.

He told Citywire Global: ‘The stimulus package is bigger than the market had expected, demonstrating that he intends to back his words with action. Markets will still have to await the proof of the pudding and how they intend to pay for it all.’