Vaccine Envy Hits Japan as Pfizer Talks Fail to Lift Markets

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(Bloomberg) — Japan won praise during the pandemic for staying open while other developed economies locked down — helping lift stocks to three-decade highs. But as the country now struggles with its inoculation program, a case of vaccine envy is breaking out.

The Topix is down 2.6% in the past month, compared with gains of 7% in the S&P 500 Index and 4.6% by the FTSE 100 in London, where photos of revelers at re-opened pubs this week contrast with reports from Tokyo, where hours at bars and restaurants have been shortened as virus cases surge.

“Japanese indexes are starting to fall behind. Foreign investors are looking at vaccination rates as an investment decision,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities Co. “Markets are at their wits end right now with the vaccination rate slower in Japan.”

Talks on a new supply of vaccine between Prime Minister Yoshihide Suga and Pfizer Inc. Chief Executive Officer Albert Bourla failed to immediately lift spirits in Tokyo markets, amid reports the capital’s leadership was considering another state of emergency to tackle the resurgence.

Suga told reporters on Monday that Pfizer had agreed to hold talks on supplying more of the vaccine, and that he expected to have sufficient supplies for the entire country by the end of September. However, he didn’t give further clarity on the timeline or how many doses might be secured. Japan’s vaccine czar Taro Kono said Sunday that a deal had been effectively reached with Pfizer.

“In a way, it’s a buying opportunity, because it’s not forever that Japan will be behind,” John Vail, chief global strategist at Nikko Asset Management Co., said Friday, before reports on a possible Pfizer deal. “People are going to get vaccinated pretty soon. A lot of people will be relieved.”

The first shipments of Moderna Inc.’s vaccine, which could be approved for use in Japan as early as next month, are also set to arrive this week, according to a report by the Jiji news agency.

Olympic Focus

Japan has entered a fourth wave of the Covid-19 pandemic with fewer than 100 days before the scheduled opening of the Olympic Games. A senior official in Japan’s ruling party indicated last week that canceling the event was an option, though he later clarified his remarks.

In Tokyo’s financial circles, some envy peers abroad who have already been vaccinated. Hong Kong on Thursday expanded eligibility to all people over the age of 16. Japan has yet to set out a schedule for groups beyond the over-65s, although officials have said they expect the rates to increase in May.

“If the inoculation rate for Japan remains so overwhelmingly low, it’s inevitable that compared to other countries, the recovery of the economy will be significantly delayed,” Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute, wrote in a report.

The country plans to distribute enough vaccine to cover both doses for people 65 years and older by the end of June, though the timeframe for actual administration of the shots hasn’t been finalized.

Less Urgency

Japan started inoculations of the elderly one week ago, with only about 7,000 of the 36 million over-65s administered to in the first four days. Nearly 2 million doses have also been given to medical workers.

A combination of factors has dragged the rollout, including a requirement for local trials, a lack of domestic development and production capacity that has made Japan dependent on imports, and a public long-skeptical of vaccines.

Also, with around 500,000 reported cases to date — compared to 31 million in the U.S. and 5.2 million in France — Japan hasn’t felt as much urgency as many nations in the West. Indeed, even during the most recent state of emergency, businesses both large and small mostly stayed open.

“Globally, Japan is still an A-student in terms of how little economic activity declined,” said Hiroshi Matsumoto head of Japan investment at Pictet Asset Management, who cites a lull in the earnings cycle for sluggishness in the markets, with a recovery already priced in and earnings season looming.

“There isn’t really a debate that Japan is somehow worse compared to other countries that need to ramp up vaccination because their outbreak is worse,” he said.

(Updates with comments from PM Suga from fourth paragraph)

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