This past week, Mr. Abe called a snap general election in order to shore up power for himself through past the 2020 Olympics.
The timing looked good as the opposition party has been eternally in disarray leaving voters with no other viable choice for strong leadership in the face of the North Korean threat.
With the announcement set for September 25th at 6pm, Mr. Abe looked to execute a fairly simple and straightforward announcement. However, at 5pm the same day, Tokyo Mayor Yuriko Koike stole a lot Mr. Abe’s thunder by announcing her new party, the Kibo no To (Party of Hope) will run against the Liberal Democratic Party, of which Mr. Abe has led since December 2012.
With 42% of the national electorate as undecided, Mr. Abe now has something him nor the LDP has not had in a long time; serious competition.
For Tokyo homeowners, no matter who loses the election, you win.
Reason being is while all the news is focused on putting Mr. Abe and Ms. Koike under a microscope, at the exact same time the Bank of Japan announced loud and clear that the current path of sustained QQE will not change anytime soon.
This means the first two arrows of Abenomics will remain steady (monetary easing and fiscal stimulus) while the politicians are allowed to focus on tackling the elusive third arrow; structural reforms.
From a macro economic perspective, Abenomics has been declared a success according to the IMF. However the IMF is only referring to the implementation of the first two arrows, not the third.
Since the advent of Abenomics, wage increases have been minimal despite record profits made by listed companies. Wage increases are the barometer by which the effectiveness of structural reforms is measured by.
While the first two arrows are reluctantly receiving A+ grades in terms of implementation, the third arrow is a C- at best.
This is why no matter who loses the election; you win. This election will be Japan’s first election that is not about whether Abenomics will continue but how to implement arguably the most important element of it; the implementation of structural reforms needed to allow the middle class to feel secure enough to spend the trillions in savings they hold.
The Bank of Japan’s stance is clear. Interest rates are staying low for the foreseeable future regardless of the outcome. This means continued demand for property in the Tokyo area.
