Shinzo Abe’s Liberal Democratic Party has retained its House of Representatives majority following the recent snap election.
The LDP will govern with the Buddhist-backed Komeito party after the parties won a reported 325 seats out of 475 in the lower house. Of these the LDP won 290, with Komeito taking 35.
As such the coalition held on to its super-majority (of greater than two-thirds of the seats) allowing Abe to push policies through parliament more easily.
Neptune’s chief economist James Dowey says: “Investors hate uncertainty and, in particular, some were concerned about the possibility that Abe’s coalition might lose its super majority, so one would think this positive result ultimately to be rewarded by the stockmarket.”
However on Monday the Topix actually fell 1.5 per cent in yen terms but Dowey says this should be evaluated in the context of Friday’s highly negative action in Western markets, which saw the FTSE 100 fall 2.5 per cent, the S&P 500 fall 1.6 per cent and the Euro Stoxx Index fall 2.9 per cent.
“More broadly, the result has strengthened Mr Abe’s hand both by clearing the political road ahead until the next genera; election, in principle to be held in 2018, and, although voter turnout was very low, establishing a fresh public mandate for his government’s ‘Abenomics’ economic policies,” says Dowey.
GAM Star Japan Equity manager Ben Williams says the market expected Abe’s victory and the fall in Japanese stocks was probably no reflection on the election.
“To be honest I think the S&P was weak on Friday and it’s quite difficult for Japan, in the short term, to de-link itself from the global economy.”
Retaining the super-majority means Abe’s coalition government can crack on with its reform mandate.
The focus of the Government is to get the economy really strong and the focus of the Bank of Japan is to beat inflation, which bodes well for investors, he explains.
While he is sceptical of the BoJ’s ability to hit its 2 per cent inflation target, he believes the current deflationary wave powered by the much-diminished oil price is “benign”.
“A lower oil price is great for Japanese consumers.”