Heisenberg Report

Japan’s Abe Wins ‘Bigly’, Consolidates Power In Election Victory

Ok, so Shinzo Abe looks like he’s set to consolidate power in Japan.

Sunday’s election wasn’t expected to produce a surprise result and indeed, there’s an argument to be made that no real surprises are even possible anymore in Japan. So there wasn’t really much in the way of risk for markets and certainly not for Kuroda and the BoJ.

But there are implications for Abe’s goal of revising the Constitution. An exit poll by national broadcaster NHK showed his ruling coalition winning between 281-336 seats in the Japan lower house vote. He needs 310 for a 2/3 majority.

Exit polls show Tokyo Governor Koike’s Party of Hope winning 38-59 seats

“For Mr. Abe, the results were a vindication of his strategy to call a snap election a year earlier than expected, and they raise the possibility that he would move swiftly to change the Constitution to make explicit the legality of the Self-Defense Forces, as Japan’s military is known,” The New York Times notes.

“The expected big win for the 63-year-old Mr. Abe puts him on course to become the longest-serving Japanese prime minister, a feat he would achieve if he remains in office through November 2019,” WSJ adds.

He’ll need two-thirds to vote on changes to article 9 in the constitution and then he’d need to win a national referendum on the issue. Of course North Korean missiles flying over Japanese territory certainly helps sway the electorate and indeed, the snap election was itself partly a referendum on Abe’s hardline stance towards Pyongyang.

“At a time when North Korea is threatening us and increasing tensions, we must never waver,” Abe said in his final campaign speech. “We must not yield to the threat of North Korea.”

Obviously, changing the constitution is one of the key issues for Japan and if Abe were to eventually succeed in that regard it would have implications for the entire world – there’s nothing hyperbolic about that assessment either.

In any event, this is probably positive for risk appetite come Monday morning and don’t forget, the Nikkei is riding its best winning streak in history…