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Japan: Pros and cons for calling a snap election

FXStreet (Bali) - Nomura's Yujiro Goto and Yunosuke Ikeda, FX Strategists at Nomura, review the pros and cons for calling a snap election in Japan.

Key Quotes

"The reasons for calling a snap election now and delaying the consumption tax hike include: 1) only about 20% of voters now support the scheduled tax hike and the decision to delay could increase cabinet popularity, 2) the government's stance to support households by postponing the consumption tax hike will have a positive effect on the ruling coalition's popularity at the scheduled nationwide local elections in April next year, and 3) opposition parties may not be well prepared for an election now, and it would be difficult for the opposition parties to organise cooperation among the major opposition parties, if the consumption tax hike is the main focus of the election (the DPJ is likely to support the scheduled tax hike, while the other opposition parties are more likely to support a delay)."

"The reasons against an election now are 1) the government needs to admit that the economy is weak when PM Abe decides the delay of consumption tax hike, 2) the BOJ's support for the government could change, as BOJ Governor Kuroda has been positive on the scheduled tax hike, and 3) only two years have passed since the previous election, in which the LDP secured a stable majority."

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