Led by Prime Minister Shinzo Abe, the Liberal Democratic Party (LDP) won a landslide victory in Japan's Upper House elections on Sunday, cementing their control of the government. With the LDP now holding both houses of parliament, we think they will be able to pursue their growth strategy and implement structural reforms more aggressively. Post-election, we believe Abe's administration will continue to focus primarily on the economy - acknowledging that focus has brought them electoral success. There has been some concern that, should the LDP regain total control, the party could become distracted trying to amend Japan's 'peace' constitution or that internal factions opposing reform might prove an obstacle for Abe, and we believe it is imperative that he use his political momentum to act decisively. Abe apparently recognizes this; after polls closed he announced "This is a powerful message telling me to proceed with my economic policies… I want to make sure people feel the effects of the economic recovery as soon as possible."
David Fuller's view I agree with this summary.
I maintain that Japan is a very special case for investors, not least because it has the most pro-growth government of any developed nation, and following Sunday's election, the unrivalled power to implement its policies. I would not be surprised to see Japan's GDP growth continue to improve dramatically, in real terms and relative to other developed economies. Japan also has some world-class technology and should prosper in this era of accelerating technological innovation.