Japan: Political turmoil clouds policy outlook - ANZ

Analysts at ANZ note that there has been a sharp drop in approval ratings for both Japanese Prime Minister, Shinzo Abe, and his cabinet, amid a rekindling of the Moritomo Gakuen scandal.

Key Quotes

“The scandal seems likely to linger, making the political situation uncertain and potentially destabilising. Indeed, the future of PM Abe is under a cloud.”

“Should Abe be unseated as LDP leader, the macro policy framework is likely to result in less stimulatory fiscal and monetary policy compared to that adopted under Abenomics. This could result in higher rates and a strengthening in the JPY.”

“If Abe remains as leader, there is likely to be a few different ways policy could pan out: business as usual; a compromise, resulting in slightly less stimulatory policy; or an accelerated reflation effort. The more secure Abe’s leadership position is, the more stimulatory policy could become.”