Implication of PM Abe’s early resignation on JPY? - Nomura

Analysts at Nomura explained that Prime Minister Abe’s resignation looks unlikely at the moment, but...

Key Quotes:

"...but as a tail-risk scenario, we consider the implications of his resignation for JPY. "

"These would heavily depend on the timing of the resignation, before or after the appointment of the next BOJ governor, in our view."

"Market interest in Japanese politics has risen further. If PM Abe is forced to resign before the next BOJ leaders are appointed and the post ends up being held by an opponent of BOJ accommodation, the negative impact on Japanese equity and yen-crosses could be significant. 

Prime Minister Abe officially stated that he is going to reshuffle his cabinet on 3 August, and we will monitor the reaction of opinion polls and whether there is any meaningful change in the balance of power within the LDP. 

However, 1) still fragmented opposition parties, 2) PM Abe’s solid base within the LDP, and 3) the quiet election calendar in 2017, suggest that possibility is limited, in our view. Re-stabilisation of the political situation should gradually support yen-crosses again."