What to expect from Japanese General Election? Read the “Special Report” by FXPrimus today!

October 18, 2017

Japan’s Abe Poised for a Big Victory According to Forecast. Here is the Possible Economic Consequences of the Snap Election.

What to expect from Japanese General Election? Read the “Special Report” by FXPrimus today!

This article is originally referred from FXPrimus News & Report

Please note that due to the upcoming Japanese Elections on October 22nd 2017, FXPRIMUS will be changing the required margin and or leverage on the below instruments:

  • All Japanese Yen currency pairs max leverage 1:100
  • Nikkei Index required margin 3%
  • Gold and Silver required margin 1%

The changes will take place at 10:00 PM server time on Friday 20th 2017 and will remain effective until the morning hours of Monday 23rd 2017.

FXPrimus Special Report

Japan’s Abe Poised for a Big Victory According to Forecast

Prime Minister Shinzo Abe announced a snap election back in September 25th, taking full advantage of a weak and disorganized opposition, while his approval ratings climbed higher, near 44%, on his hard stance against North Korea.
Despite opposition – the centrist Democratic Party (DP) – replaced its leader Murata with Maehara, approval ratings did not improve, and as a result DP dissolved bringing to life a bigger threat for Abe; Yuriko Koike’s Party of Hope. Luckily for Abe, the newly rival party’s entry to the ‘competition’ did not last as Koike decided not to run for parliament, not to abandon her position as a Governor, allowing Abe’s Liberal Democratic Party (LDP) and its partner Komeito to strengthen the ruling coalition’s election forecast to over 300 seats.

LDP is likely to win 280 seats alone, while Koike is expected to hang on to 57 seats, more than the 40 seats of the Constitutional Democratic Party (CDP) and the 21 seats expected to be won by the Japanese Communist Party.

Possible Economic Consequences of the Snap Election

Despite Abe’s decision to call a snap election was a result of his intention to prevail tensity with North Korea, another important reason for Abe was to gauge voters’ approval for his scheduled consumption tax hike which is due in October. His plan is to use 40% of the additional tax proceeds to invest mainly in spending, education and nursing care services instead of pensions, topping a total investment of 2 Trillion Yen. The government’s plan for the excess 5 Trillion Yen the newly proposed tax plan is expected to generate was to allocate 4 Trillion Yen to fiscal consolidation and 1 to improve the social security system. Abe’s plan is to use 2 Trillion Yen instead. Consequently, the government might have to suspend its target for a primary balance surplus by the fiscal year 2020; a possible cause of reflation.

As a note, mind that the last consumption tax increase did lead to the end of deflation, however, a change in the direction for BoJ could spell a rally for USD/JPY.

Abe’s Challenges and Concerns

As Abe readies for another win voters still remain concerned about the consequences of the consumption tax increase on the economy as well as their livelihoods. Abe’s policies are most likely to be carried out by his successors, taken that he is replaced by another party leader as this could be a case, however, the child care and nursing services sector are not too large to have a big effect even if the planned stimulus packages are immediately approved.

Abe’s plan to divert funds for social security spending will most likely extend the timeline of repaying back the country’s swollen debt, which may be comforting to investors as aggressive public spending, monetary easing and a weak Yen is what investors have grown to know Abe for. At the same time, ditching aggressive public spending and monetary easing is what Koike’s agenda entails, and with the spike in her popularity, an anti-Abe division is being born.

Aside economic and political concerns, the North Korean crisis is the biggest challenge for Abe and Japan. While tensions between Japan and North Korea reached a boiling point amid a threat from North Korean missiles in the course of Abe’s campaign, Abe announced his proposal that the nation amends the Constitution and fully legitimate Japanese forces in preparation from probable national security risks.

Regardless, Abe desires a mandate and to implement official sanctions against North Korea, a move supported by US president Trump, as the current nuclear problem inflates the lingering geopolitical situation. Both opposition leaders Koike and Shii encourage dialogue and not pressure.” Stavros Tousios, FX Market Specialist. This special reports is provided as general market commentary and does not constitute investment advice.

Original Source: FXPrimus News & Report

50 USD for Free

Free 123 USD

30 USD for Free

25 USD for Free

300 USD for Free

100 USD for Free

Partner brands

Hercules