Japan: Declining election risks – Nomura

In view of analysts at Nomura, Japanese election risks have declined, with opinion polls indicating the transfer of support from the ruling coalition to the Party of Hope has increased, while it still seems unlikely that Ms. Koike will run for election.

Key Quotes

“With Japanese election risks declining, focus may turn towards who will be the next BOJ governor. We think this will be an important risk factor for JPY trading over the next six months. While it is too early to shortlist the candidates, especially ahead of the impending snap election, we see three potential scenarios: 1) Prime Minister Abe loses his status to appoint the next governor, 2) Prime Minister Abe maintains the status quo, and 3) Prime Minister Abe embarks on further economic policy experiments. We believe the first scenario would be the most JPY positive and the third scenario the most JPY negative. Although further economic policy experiments are not our central case, we think market expectations for a helicopter money-type policy mix will likely help to revive a weakening JPY.”