Political risk disappearing: another victory for Abe likely - Nomura
|Analysts at Nomura noted that local media, such as Asahi and Nikkei, report that the ruling coalition (LDP and Komeito) has been gaining momentum.
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"They conducted large sample opinion polls, and based on the poll results and their own analysis they have released an initial prediction.
Asahi and Nikkei both predict that the LDP will gain more than 200 of the 289 single constituency seats. Asahi says the party should gain about 68 proportional representation seats, while Nikkei reports the party should win 55 or more proportional representation seats (total: 176 seats). In total, the party should easily gain the singleparty majority (233), according to the two forecasts. LDP’s junior coalition partner, the Komeito, may gain as many as 34 seats and in total, the coalition should secure around 300 seats, according to Asahi and Nikkei. Yomiuri also reported that the ruling coalition may win 300 seats. Nikkei suggested the possibility of an even stronger outcome for the ruling coalition to achieve the super majority (310) again.
A new party created by Tokyo Governor Koike, the Party of Hope (PoH), is losing momentum, according to Nikkei. The party is expected to increase its seats from the latest 57 seats, but the upside should be limited for the party. Instead of the PoH, the Constitutional Democratic Party of Japan (CDPJ), a party created by the left-wing lawmakers of the DP, is expected to increase its seats from 15 to 30 or more.
Before the dissolution of the lower house, the LDP had about 285-290 seats. Thus, the party looks likely to lose some seats, according to their prediction. That said, Prime Minister Abe stated that he would step down when the coalition loses the majority, and analysis by local media suggests that the risk of this is now very slim. The LDP looks unlikely to lose its single-party majority status. We initially expected the LDP to easily gain a single-party majority Before the dissolution of the lower house, the LDP had about 285-290 seats. Thus, the party looks likely to lose some seats, according to their prediction. That said, Prime Minister Abe stated that he would step down when the coalition loses the majority, and analysis by local media suggests that the risk of this is now very slim. The LDP looks unlikely to lose its single-party majority status. We initially expected the LDP to easily gain a single-party majority.
Two new parties were created quickly, but opposition parties’ actions have failed to change the political picture meaningfully. Nearly 300 seats by the ruling coalition is likely a better outcome than the market consensus.
The early resignation of PM Abe has been a downside tail risk for yen crosses, as the BOJ leadership nomination is awaiting us Local media will update their forecasts next week and the politics are always uncertain. Nonetheless, we judge the tail risk is lower now. Stability in Japanese politics should encourage foreign investment by Japanese investors because of gradually improving risk sentiment, supporting yen crosses."
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