Japan: Snap election, strong Tankan, little inflation - ING

Analysts at ING note that PM Abe recently announced he would dissolve the diet later this month and call a snap election – most likely on Oct 22 (with campaigning starting on Oct 10).

Key Quotes

“Abe also unveiled plans for a 2 trillion yen economic stimulus package, which would be used mainly for increased spending on child care and education. But the creation of a new "Party of Hope" by Tokyo Gov Koike has got some in markets drawing potential parallels to this snap election and what we saw in the UK in May (with PM May's election misstep). Such sentiment could keep JPY on the back foot.”

“Japan’s strong 3Q Tankan report, with big gains for large manufacturers (+22 from +18) and gains in most of the other indices, including profits, suggest a number of things: (1) that the momentum behind Japan’s economy is still strong; (2) that the Japanese economy can withstand a stronger JPY; and (3) that PM Abe, if he wins the snap election, will find it harder to weasel out of following through on his consumption tax hike pledge this time. Our economists note that it looks to be another strong growth quarter, without much inflation pressure. We also get wage growth data (Fri), which is likely to remain flat-ish and would corroborate this view.”