(Bloomberg) — Prime Minister Fumio Kishida triggered another dip in Japan’s stock market by indicating he could consider introducing guidelines for share buybacks, a key crutch for the country’s equities in recent years.
Responding to a question from opposition lawmaker Takayuki Ochiai in parliament Tuesday, Kishida said introducing “guidelines” on buybacks could be appropriate, though he added caution would be needed in implementing any strident regulation.
The Nikkei 225 extended declines, falling as much as 1.2% in afternoon trading. SoftBank Group Corp., which is currently in the process of a 1 trillion yen ($8.8 billion) share repurchase program, fell as much as 1.6%.
“If buybacks become subject to restrictions, that will cap the upside in share prices,” said Tatsushi Maeno, senior strategist at Okasan Asset Management Co.
Prime ministers regularly take questions from lawmakers on various topics in parliament, and the responses don’t necessarily indicate policy direction.
Buybacks surged in Japan under the administration of former Prime Minister Shinzo Abe, who implemented a corporate governance code and encouraged improving Japan’s then-poor shareholder returns. Share repurchases are set to rise to more than 7 trillion yen this fiscal year, according to an analysis by Tokai Tokyo Research Institute Co.
Kishida took office promising to introduce a “new form of Japanese capitalism,” which has repeatedly spooked markets. Early in his administration, talk of capital gains taxes led to a dip in the Nikkei 225 that was termed the “Kishida Shock.” While that plan was shelved, Kishida’s subsequent strong showing in a general election has seen talk of taxes being revived.
Kishida has also called for tax breaks for companies that raise wages rather than dividends, though he hasn’t previously openly commented on regulating buybacks.
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