Markets react little to Kan's offer to quit, no-confidence vote+

TOKYO, June 2 Kyodo -
Stock and foreign exchange markets in Tokyo reacted little on Thursday to an unsuccessful no-confidence motion against the Cabinet of Prime Minister Naoto Kan or his offer to step down in the future, but the country's continuing political uncertainty has fueled concerns over its impact on the economy and government responses.
Brokers and analysts say, however, that the impact from the day's event will be limited and temporary, and that other factors, such as developments in the United States and other countries, and a possible slowdown in the global economy, continue to figure more prominently in the markets.
The failure of the no-confidence motion in parliament ''produced no change (in the status quo), so investors' eyes are on what will happen from now on,'' said Yumi Nishimura, a senior market analyst at Daiwa Securities Co.
But ''market players have been looking at moves within overseas markets, and such a trend is likely to continue,'' she said, indicating that market participants' attention is now likely to shift back to lingering eurozone debt problems and concerns about the U.S. economy.
How the Japanese government copes with the consequences of the March 11 quake and tsunami may also affect the stock market, brokers said, as investors have grown concerned about the slow political response when major manufacturers are making steady recovery from disruptions caused by the disaster.
Thursday's event had little impact on the foreign exchange market, a senior dealer at a major Japanese bank said.
''The yen would have been sold if the no-confidence motion (against Kan) had passed, with the likely dissolution of the House of Representatives leading to a further cut in Japan's sovereign debt rating,'' he said.
But he noted that ultimately any impact political and economic developments in Japan may have on the dollar's movement against the yen will only be temporary, adding that a large selloff of the yen is unlikely because yen-denominated assets are kept mostly in Japanese hands.
Hideki Hayashi, a global economist at Mizuho Securities Co., said that in principle stability in Japanese politics will lead to a stronger yen and instability to a weaker yen, with Thursday's developments pointing toward stability in the sense that the no-confidence motion was voted down.
But given that Kan is now regarded as a lame duck and facing a tougher time advancing his parliamentary agenda for post-disaster reconstruction, Hayashi said, ''Much remains unpredictable and (the dollar's move versus the yen) in the balance.''
Minori Uchida, senior analyst at Bank of Tokyo-Mitsubishi UFJ, said that because of Kan's latest overtures, whether the next Cabinet would carry on the fiscal rehabilitation policy adopted by his Cabinet would ultimately become a factor in the foreign exchange market.
''But that's still a long way off,'' he said.
Brokers say Kan's suggestion that he will step down once progress is made in containing the nuclear crisis and rebuilding tsunami-hit areas has raised questions about the government's ability to take charge.
''People will be asking what decisions can an out-going prime minister make, or whether he will be trusted (by other countries),'' said Masayoshi Okamoto, an equity strategist at Jujiya Securities Co.
==Kyodo
2011-06-02 23:47:38