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Market-watchers seem to be voicing a near consensus that Prime Minister Shinzo Abe’s resignation won’t immediately mean swerves in Japan’s economic agenda.

While stocks slumped amid surging volatility following the news of Abe’s exit Friday, expectations for policy continuity are prompting some money managers to say the nation’s shares are a buy. Currency-watchers say the yen could add just a little more to its rally from Friday while in bonds land, Treasury yields are seen having a bigger influence on Japanese Government Bonds with the Bank of Japan likely to persist with its ultraeasy policy under Gov. Haruhiko Kuroda.

The race to replace Abe is starting to take shape as candidates declare their intent to the inner circles. Chief Cabinet Secretary Yoshihide Suga has decided to run for ruling Liberal Democratic Party’s leadership election to succeed his boss, local newspapers Yomiuri and Asahi reported, while former Defense Minister Shigeru Ishiba has said he will decide whether to run or not, after seeing what election method will be used, Kyodo reported Sunday.

Here’s what investors are saying about the outlook for Japanese assets:

Stocks

Despite Friday’s losses, the Topix index remains Asia’s second best-performing benchmark gauge in August — behind Vietnam’s — amid signs that coronavirus infections in Japan are subsiding.

“There haven’t really been that many opportunities to buy on the dip — so this could possibly be an opportunity,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “As long as the BOJ doesn’t change its monetary policy stance, the stock market will remain resilient.”

Nader Naeimi, the head of dynamic markets at AMP Capital Investors Ltd., says there is a “large degree” of continuity within the ruling party. “This reinforces the thesis” that now is the time to buy Japanese equities, he said.

Japanese auto, energy, industrial and transport names look attractive as preference is shifting away from growth stocks, Naeimi said.

His views are echoed by Nicholas Smith, a strategist at CLSA Securities Japan Co. who sees a buying opportunity in stocks.

“The truth is Japan has been remarkably successful in handling the coronavirus and I think the succession is likely to allow a few policy tweaks that are probably in the works anyway,” he said.

Some strategists see Japan’s currency only adding a little more to its strong advance in Tokyo on Friday.

“It’s hard to see a sustained break below 105 in the next six months” for the dollar-yen pair, according to Ranko Berich, head of market analysis at Monex Europe Ltd. in London. That’s because such a move “would be deflationary and would likely prompt some kind of action from the BOJ, or even embolden Abe’s successor into looser fiscal policy,” he said.

Though a surprise, Abe’s resignation “is a one-time, political headline news,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co.

“Dollar-yen direction is determined by where the interest-rate spread might be headed,” he said. “It won’t suddenly break 100 barrier. Should the U.S. not adjust interest rates until after 2023, Japan is unlikely to budge as well.”

Bonds

While JGBs were sold Friday on Abe’s resignation and also in response to the rise in Treasury yields, it’s important to see whether or not the steepening of the U.S. curve will continue, according to Eiichiro Miura, general manager of the fixed-income department at Nissay Asset Management Corp.

“Moves in Treasury yields could have a long-lasting impact,” he said. “The BOJ could act more proactively and buy more JGBs when yields rise to show its commitment to its monetary policy is intact even after Abe’s departure.”

The Japanese central bank is going to continue with its current monetary easing to meet its objectives, making no immediate changes, despite Abe’s resignation, according to people familiar with the matter.

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