Morgan Stanley: Japanese election results may benefit the Nikkei Index, with large-cap and defense stocks likely to outperform the market in the short term

Glonghui, February 9th｜Japan's House of Representatives held an early general election, with the ruling Liberal Democratic Party winning by a landslide, securing 316 out of the total 465 seats in the House. Morgan Stanley stated that the election results may benefit the Nikkei Index, and in the short term, large-cap, highly liquid, high-beta stocks, as well as defense-related stocks, are expected to outperform the market. Morgan Stanley also noted that if expansionary fiscal policy tendencies are maintained during the budget review period and Japan and the US emphasize defense strategy coordination, the effectiveness of high-market trading strategies is likely to continue temporarily. The team believes that the market should examine the actual effectiveness of Japan's version of the Government Efficiency Department, and at this stage, it is still too early to view the debate on consumption tax reduction as a positive factor for domestic demand-related stocks.