Voting has ended in Japan, and initial reports from exit polls show a victory for the opposition LDP party, as expected, yet the size of the projected victory seems on the far end of projections – a landslide victory that could allow a rapid change in policy, especially if a 2/3 majority is indeed secured. This could further weaken the yen, even without time for consolidation.
Projections by NHK show the LDP will double its seats and capture 275 to 310 out of the 480 seats in the House of Representatives. That’s far more than the 241 needed for a majority.
Update: real results show that LDP + New Komeito secured a 2/3 majority, paving the way for a weaker yen.
Update 2: Analysis: It’s ALL about the Yen
LDP could form a coalition with New Kometio, which received between 27 to 35 seats. Together they could pass the 320 seat threshold – two thirds of parliament. This is a report by NHK.
LDP and New Kometio have partnered many times in the past, and political analysts say they will probably partner again, even if LDP could form a government on its own.
By gaining two thirds, the lower house would have a very easy time passing laws. One law that Abe wants to change is the BOJ law.
The outgoing government led by DPJ’s Noda suffered a big defeat, falling from 230 seats to 55-77 seats.
Shinzo Abe, leader of the LDP, vowed to ease monetary and fiscal policy. The buildup towards the elections already weakened the yen ,and there’s more to come.
Markets are still closed, and the reaction will be seen only later. Not all currencies are expected to react in the same manner. Here is a guide: Japanese Elections: Potential Reaction of Currencies.
Dollar/yen got close to critical resistance at 84.20, rising in an upwards channel. For more, see the USD/JPY forecast.
Share
