Filmed by Leo Lewis. Edited by Tom Griggs. Additional footage by Reuters.
Late last week, as a potentially toxic cloud of political scandal wafted towards Japan's prime minister, a few heavyweight global investors began grilling their brokers. Could a fracture over a kindergarten bring Shinzo Abe down? Could Abenomics persist for more than a day without him? How badly with the Topix Index take Abexit? These are questions, confides one Tokyo based trader, that nobody much likes to ponder.
Guesstimates suggests an abrupt end to Mr. Abe's premiership would lop as much as 20% of equities in the immediate aftermath. These aren't necessarily too fanciful, either. It is rare that stock market levels are so intimately bound to an individual. At its Friday close of 1565 points, the Topix Index is more than 82% higher than it was when Mr. Abe came to power in December 2012. The Bank of Japan has played its part in that turbocharging, but the real flood of foreign investment was drawn to the Abe narrative, not just for its promise of reform, but because for the first time in more than a decade, it appeared to be led by somebody who had staying power.
The fear of Abexit at this point feels overdone. True, the prime minister is now personally embroiled in a grimy spat over a cut-price sale of public land to a nationalist kindergarten, and being forced to publicly deny allegations that he made a donation to the school. This week, and the reason that the big funds are getting a bit anxious, the head of the school will testify in parliament.
But no evidence for the allegations has emerged. Mr. Abe retains the untroubled, bulletproof appearance that has characterised his four years in power and made such striking contrast with the permanent vulnerability of his five immediate predecessors. He faces no serious opposition. He is currently on a four-country tour of Europe, playing, with unthreatened aplomb, his beloved role of inexhaustible global advocate of Japan.
But the problem with the buy Abe trade, say strategists, is that it was always a blunt instrument. For all the breathless 2013-2015 Abenomics rally, the steady 2016 to '17 trickle of evidence that Abenomics is actually working has done little to thrill global investment interests. The excitement was never all that nuanced, and the money behind it might not have the patience to see how much of Abenomics would survive an Abexit.