Abe vote possibly better for investors, says Schroders’ Shogo Maeda

Shogo Maeda, head of Japanese Equities at Schroders, says a win for Shinzo Abe at the upcoming Japanese parliamentary elections would likely be the better outcome for investors.

At the beginning of November the Japanese prime minister, Yoshihiko Noda, announced an early general election on December 16 and the lower house of parliament was dissolved. The outcome of the election is likely to determine policy development for the Bank of Japan.

Interest has focused on the new opposition leader, Shinzo Abe, (who was Prime Minister for a short time in 2006). The Liberal Democratic Party is likely to become the largest party, but it is still unclear whether it will win an outright majority or will form a coalition with one or more of the smaller parties. It is likely that this will result in Abe becoming the next prime minister, although the outcome is not certain.

If Abe is elected we believe this will be beneficial as he is slightly more biased towards fiscal and public work spending, which would be promoted as improving infrastructure and the ability to withstand an earthquake. Although his political rhetoric is stronger about China than other political leaders, we feel he is likely to focus on improving the relationship with China once again as he did when he took over the severely strained relationship from Koizumi.

While there are a range of possible outcomes most of them are reasonably positive for the market. Investors have welcomed the early election and the probable end of Democratic Party led administration, which was perceived to be lacking governance and strong leadership.


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