Nikkei tumbles on likely end of 'Abenomics'

By Hideyuki Sano
TOKYO, Aug 28 (Reuters) - Japanese shares fell on Friday by
their most in almost a month on news Prime Minister Shinzo Abe
will resign, bringing an abrupt end to his stable government and
policy mix of aggressive monetary and fiscal stimulus dubbed
Abenomics.
The Nikkei share average .N225 declined 2.65% at one point
before closing 1.41% lower at 22,882.65.
"The Nikkei will likely head to around 21,000, a level where
its price-to-book ratio will be 1.0," said Takatoshi Itoshima, a
strategist at Pictet Asset Management.
"Japanese stocks tend to do well under a long, stable
government and that was especially the case for Abe. Foreign
investors may also worry what will happen to the relationship
between the government and the Bank of Japan."
Abe, the nation's longest serving premier, is set to resign
due to his worsening health after almost eight years in the
office, Reuters reported, citing a source close to a ruling
party official. His aggressive stimulus and close collaboration with the
central bank have helped to revitalise Japanese shares, with the
Nikkei reaching a 27-year high in 2018.
"The market has rebounded a bit for now but I think we need
to be cautious, going into next week," said Shingo Ide, chief
equity strategist at NLI Research Institute.
"Whoever succeeds him, it will be tough to garner strong
support and political uncertainties will likely weigh on
markets."
The broader Topix .TOPX lost 0.68% to 1,604.87, with
turnover rising to a more than two-month high of 2.825 trillion
yen ($26.60 billion).
Growth shares .TOPXG lost 1.21% while value shares
.TOPXV were almost flat, as investors rotated into financials
and other battered value shares following the U.S. Federal
Reserve's new long-term policy strategy to allow higher
inflation.
The Fed's announcement boosted U.S. bond yields to a
3-1/2-month high of 0.789% US10YT=RR .
Dai-ichi Life 8750.T jumped 4.4%, while T&D Holdings
8795.T gained 4.2%. Among banks, Mizuho 8411.T added 1.6%,
Sumitomo Mitsui Trust 8309.T gained 3.2% and Sumitomo Mitsui
Financial 8316.T climbed 2.2%.
"It is becoming clear that the long-term U.S. bond yields
have bottomed out. So, investors who haven't prepared their
positions for rising yields would want to buy insurers and
financials as hedge," said Takenori Yamamoto, a fund manager at
Norinchukin Zenkyoren Asset.
On the other hand, investors booked profits from tech shares
and other recent strong performers.
Sony 6758.T and SoftBank Group 9984.T both shed 3.3%.
Medical support service operator M3 2413.T dropped 5%, while
chip making machine maker Tokyo Electron 8035.T lost 3.5%.
The index of Mothers start-up shares .MTHR fell 4.66%.

($1 = 106.2100 yen)