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Last Updated: Monday, 12 September 2005, 08:36 GMT 09:36 UK
Markets hail Japan poll landslide
A Japanese postman leaves the Nihonbashi post office in Tokyo
Plans to privatise Japan Post were at the centre of the election battle
Investors have reacted favourably to Japanese Prime Minister Junichiro Koizumi's landslide election win, with shares and the yen rising strongly.

The Nikkei-225 index rose 204.39 points or 1.6%, ending at a four-year high of 12,896.43. The yen strengthened against the dollar from 110.50 to 109.61.

Mr Koizumi's victory gives him a strong mandate for reforms to revive Japan's sluggish economy, analysts say.

Markets also welcomed figures showing faster-than-estimated economic growth.

Japan's gross domestic product grew at a revised quarterly rate of 0.8% in the three months to the end of June, up from the preliminary figure of 0.3%, the government said.

Stagnation

Mr Koizumi called the election after parliament blocked plans to privatise the country's post office, the world's biggest savings bank.

The prime minister hopes that taking Japan Post into the private sector will redirect Japanese savings away from often wasteful public works projects, used by successive governments as a way of giving an artificial boost to the economy, analysts say.

Japan is the world's second-biggest economy, but it has suffered from years of stagnation while its Asian neighbour China has powered ahead.

Michael Hughes, the chief investment officer for Baring Asset Management, told the BBC that selling off Japan Post would help alter Japan's culture of share ownership.

"Shareholder structure has changed and the privatisation of the Japanese post office will just continue that, but at a much faster pace," he explained on the BBC's World Business Report.

"That basically means that shareholders matter more, that their interests count for more."

Another analyst, Morgan Stanley's chief Japan economist Robert Feldman, said the result had left the anti-reform forces "splintered".

"With such a stunning result, passage of the postal reform bills is virtually assured," he said. "The next areas are medical reform, civil service reform, public sector outsourcing and government financial institution reform."




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