Aso Is Biggest Drag for Japan Stocks, Survey Shows

By Toru Fujioka

Jan. 7 (Bloomberg) -- Investors see Japanese Prime Minister Taro Aso’s administration as the biggest obstacle to a recovery in the nation’s stock market this year, a Nomura Securities Co. survey showed.

Some 53 percent of 1,000 investors said Aso’s government would have an adverse effect on the shares of Japanese companies in 2009, according to the survey published in Tokyo yesterday.

Aso’s popularity has plunged to about 20 percent from 50 percent when he became leader less than four months ago, on concern that he’s not doing enough to combat the recession. Parliament has yet to approve two stimulus packages as political bickering intensifies ahead of elections due by September.

“The Aso administration can’t implement economic packages when they’re needed most,” said Takahide Kiuchi, chief economist at Nomura Securities in Tokyo. “It would be better for Japan to have an election earlier than September.”

The domestic economy was investors’ second-largest concern at 27 percent, followed by problems in the U.S. financial sector, the report showed. Respondents were asked to pick five negative and five positive items out of 30 choices in the survey, which was conducted in December.

Japan’s downturn deepened in November as exports and factory production fell the most on record and unemployment rose.

Nikkei Rallies

The Nikkei 225 Stock Average lost 42 percent in 2008, its worst-ever performance. Stocks have since rallied 4.3 percent on optimism U.S. government spending will spur demand for Japanese products. The Nikkei climbed 1.7 percent today, the seventh day of gains, capping the longest winning streak since April 2006.

“Various factors” affect equity markets, Chief Cabinet Secretary Takeo Kawamura said at a regular news conference today. “If we need to find out reasons for stocks moving in the future, we have to ask the market.”

Aso on Oct. 30 pledged to pump 5 trillion yen ($53 billion) into the economy, including giving households 2 trillion yen in handouts, a policy that proved unpopular with voters and members of his ruling coalition. He postponed submitting a bill to parliament to fund the plan until January. Then on Dec. 12 he announced a second package, which hasn’t been implemented either.

Watanabe’s Threat

Lower house lawmaker Yoshimi Watanabe this week threatened to break from the ruling Liberal Democratic Party if Aso doesn’t abandon the pledge to offer cash payments to the public and dissolve parliament. The opposition Democratic Party of Japan, which has used its control of the upper house to block legislation, is also urging Aso, 68, to call an early election.

“It’s a mess. Aso is facing three political deadlocks: with the DPJ, with coalition partner Komeito and even with LDP members,” said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “There’s no doubt it’s very difficult for him to pass policies.”

Aso’s approval rating slid to 21 percent last month, according to a Nikkei newspaper survey published on Dec. 29. The poll was at least the fifth to show his popularity falling below that of his predecessor, Yasuo Fukuda, who resigned in September.

The Nomura survey also asked investors about what might help the stock market this year. Some 36 percent of respondents said the economy would have a positive effect, and 24 percent cited policies of the Bank of Japan.

The central bank cut the benchmark interest rate to 0.1 percent on Dec. 19 and said it would start buying commercial paper for the first time to ease borrowing costs for companies.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net