The Nikkei on PM Abe's loss in the Tokyo election last weekend:
(more on this here from Monday this week:
- Japan PM Abe's party big loss in Tokyo poll
- More on this weekend's election in Tokyo
And, more directly to the point:
The importance of this for policy is, in a nutshell is that it probably puts the government economic reform program (addressing long-term structural issues) back, as the focus will likely switch to maintain the economic recovery:Noises about delaying a balanced budget (flagged for by fiscal year 2020) will increase
- Will likely will set the stage for another delay in the sales tax hike (currently scheduled for October 2019)
- Thus, fiscal policy could stay more accommodative (more JGB issuance)
- Even more space for continued BOJ monetary expansionary policy stance (lower for longer). I'll leave considerations about how long the BoJ can maintain its current pace of balance sheet expansion (the Bank already owns nearly 40% of JGBs)
)
From the Nikkei today:
- As the prime minister's Liberal Democratic Party smarted from an electoral defeat Sunday ... LDP members clamoured for immediate steps toward regaining support. On Wednesday, a group of 28 second-term members of the Diet's lower house signed onto a proposal to increase spending in fields such as public works and education.
So, nothing to surprise us there!
