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Seven years ago on Wall Street, Prime Minister Shinzo Abe urged investors to “buy my Abenomics,” promising to chart a path to growth for deflation-mired Japan.

Fast forward to 2020, and Abe — now Japan’s longest-serving prime minister — is quitting due to ill health, leaving an economy that is smaller, badly hit by the novel coronavirus pandemic and with more debt than when he returned to power in 2012.

Whoever gets what some lawmakers call “the short straw” in the ruling party’s leadership race in mid-September, the next prime minister may face difficulty trying to gain market confidence in post-Abenomics Japan, according to market observers.

“Political uncertainty will weigh on the market until his successor is selected, though there shouldn’t be a sharp fall in shares,” said Makoto Sengoku, a market analyst at the Tokai Tokyo Research Institute. The Nikkei is expected to stay between 22,000 and 23,000, he said.

When Abe returned to power, the Nikkei Stock Average was trading around the 10,000 level. The index ended Friday, the day Abe announced he would be stepping down, at 22,882.65 after scaling a 27-year high in 2018.

The prime minister’s “Abenomics” program was three-pronged, focusing on bold monetary easing by the Bank of Japan, flexible fiscal policy and structural reform to spur growth.

Initially, it lifted shares and weakened the yen, a boon to the nation’s export-reliant economy. A weaker yen strengthens the price competitiveness of Japan-made products abroad and lifts profits earned overseas when repatriated.

Economists and market analysts say the novel coronavirus pandemic, which led to a record 27.8 percent contraction in Japan’s gross domestic product in the April to June quarter, gives the next leader little wiggle room to drastically alter the current policy framework.

But some say financial markets are vigilant to surprises, keeping a close tab on whether Abe’s departure will affect the BOJ and Governor Haruhiko Kuroda, whose current term runs until April 2023.

There are concerns about whether the current large-scale monetary easing will be maintained, including purchases of exchange traded funds, a key factor supporting market sentiment in Tokyo, they said.

But Martin Schulz, chief policy economist at Fujitsu Ltd., said it was “quite certain” that monetary policy should be expansionary during the virus outbreak, adding that Abenomics has built a close link between fiscal and monetary policies that cannot be broken easily “any time soon.”

“The new prime minister will need a new agenda,” he said. “Since the limitations of Abenomics have become obvious, international investors will have a very close look at the next reform agenda.”

Abe’s government and the BOJ agreed in 2013 to strengthen policy coordination and “work together” to beat deflation.

While the government has increased spending to support the economy, the central bank has stepped up asset buying, gobbling up massive amounts of Japanese government debt so it now holds over 40 percent of the outstanding bonds.

According to the International Monetary Fund, Japan is expected to see its debt-to-GDP ratio climb to 251.91 percent in 2020, the worst among advanced economies.

The size of real GDP, meanwhile, stood at ¥498 trillion when Abe returned, but it shrank to ¥485 trillion in the three months through June, hit by the virus spread, according to government data.

One relatively bright spot is an improving labor market, with the jobless rate falling to 2.8 percent in June from 4.3 percent when Abe took office.

“I shot the three arrows (of Abenomics) to defeat two decades of deflation and as a major policy agenda we have been aiming to create a market where people who wish to work can find jobs,” Abe told the press conference at which he announced his intention to resign. “Over 4 million jobs have been created.”

Female participation in the workforce has been on the rise as the country has battled an acute labor shortage. Still, Abe failed to deliver on his promises to bring the number of children on waiting lists for nursery schools to zero, and working style reforms are still only half complete.

Abe earnestly urged companies to raise wages so consumers would loosen their purse strings, in the hope of a pickup in consumption raising prices closer to the 2 percent inflation target.

The BOJ is still far from that goal and only a 0.3 percent year-on-year rise in the consumer price index, excluding fresh foods, is projected for fiscal 2021.

Despite the mixed results of nearly eight years of Abe’s economic program, Takuya Hoshino, an economist at the Dai-ichi Life Research Institute, said Abe’s efforts to boost employment were “in the right direction.”

“That said, when jobs created were in sectors that are in desperate need of labor and were taken by women who need to work part-time after raising kids or elderly people, we cannot expect sharp wage growth,” he said.

The ruling Liberal Democratic Party is preparing for the election to choose its leader, and thus the next prime minister. Chief Cabinet Secretary Yoshihide Suga, Abe’s right-hand man, has emerged as a strong candidate, joining former Foreign Minister Fumio Kishida, currently the LDP’s policy chief, and former Defense Minister Shigeru Ishiba.

Economists and analysts say Suga and Kishida would seek to maintain the status quo, while Ishiba could be a wild card. In a magazine interview, Ishiba, an Abe critic, cast doubts on Japan putting “excessive” emphasis on financial capitalism that seeks to benefit shareholders. He stressed the need to support small and midsize companies as well as regional economies.

Suga, who has been in charge of crisis management and serves as the public face of the Abe administration, is expected to garner support from many LDP lawmakers. Ishiba, however, ranked first in a Kyodo News poll conducted over the weekend as the person favored most by the public to become the next prime minister. Respondents also said the novel coronavirus response and the economy were the top two priorities on which the next government should focus.

“Japanese markets have enjoyed a condition in which there was almost no political risk, but that advantage may disappear in the future,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “An unstable government is what foreign investors dislike most.”

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