Shinzo Abe Wins Japan’s Snap Elections By A Landslide
What Shinzo Abe’s Win Could Mean For Japanese Stocks (Part 1 of 6)
Heidi Richardson takes a closer look at Abenomics in light of the election and describes the implications for investors.
The results of the recent snap election in Japan came in largely as expected — with a decisive win that maintains, and potentially increases, the super-majority for Prime Minister Shinzo Abe and his Liberal Democratic Party (or LDP). Abe called the election two years early and, despite extremely low voter turnout, his gamble appears to have paid off.
Market Realist – Shinzo Abe wins snap elections.
Shinzo Abe’s LDP and its coalition partner Komeito swept the snap elections held on December 14, 2014. The partners won a total of 325 seats in the 475-seat Diet, the Japanese parliament. This was much higher than the 238 required for a majority. This gives the partners a comfortable two-thirds majority, which is necessary to make constitutional amendments.
Fewer people were voted in this time around compared to the previous election two years ago. According to various sources, voter turnout was a little over 52%, down from 59.3% during polls in 2012.
The LDP won 290 seats—slightly lower than the 295 that were registered in the previous election in December 2012. Meanwhile, Komeito won 35 seats, improving from the 31 seats it had won in the 2012 elections.
Due to the dominance of the LDP, the election was seen more as a referendum of Abe’s unconventional economic policies, also known as “Abenomics.” You’ll find more on Abenomics later in this series.
The lack of quality opposition meant that Japanese markets were rooting for an LDP victory. This should encourage investors in Japanese exchange-traded funds (or ETFs) such as the iShares MSCI Japan Index Fund (EWJ) and the WisdomTree Japan Hedged Equity Fund (DXJ). Investors in the iShares MSCI EAFE Index Fund (EFA) and the Vanguard MSCI EAFE ETF (VEA), which have more than 20% exposure to Japanese stocks, should also be pleased. All these funds hold top Japanese stocks, including Toyota (TM) and Sony (SNE).
This series will explore the implications of Abe’s win and what it means for the world’s third-largest economy. For a full recap on the election and its implications for Japan, read our series Abenomics returns for an encore.
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