FXstreet.com (Barcelona) - The political situation in Japan has
changed dramatically last week. An agreement on deficit financing
bills between the ruling Democratic Party of Japan (DPJ) and the
Liberal Democratic Party (
) was finally reached, ensuring that the situation did not reach a
crisis point where all deliberations in the Diet got suspended.
According to Junko Nishioka, Chief Economist at RBS, "Before the
DPJ's party leadership conference on 14 November 2012, it was
widely thought that the Diet would be dissolved by the year end at
However, the situation changed once Prime Minister Yoshihiko Noda
announced at the conference that the Diet would be dissolved on 16
November and it became more apparent the DPJ is unlikely to retain
its majority in the Lower House. According to the official
announcement, the public notification of the general election will
happen on 4 December and voting is scheduled for 16 December.
"The worst seems to be already behind us, but we think the
political situation is still fragile and carries the risk of the
announced political calendar falling behind. The key point for now
is whether any new administration will be able to introduce
economic measures in the FY12 supplementary budget in order to
boost business activities in 1H2013. If there are delays, the
economy could become more vulnerable and it will be even more
difficult to implement the consumption tax hike agreed upon by the
ruling and opposition parties." Nishioka warns.