LDP-Komeito Coalition Secures Upper House Japanese Parliamentary Election

July 22, 2013

Prime Minister Abe’s party, the Liberal Democrats, will hold 115 of the 242 upper chamber seats.  The LDP’s junior partner, New Komeito, will hold 20 seats.  Thus the ruling coalition now controls a comfortable majority of 135 seats, up from 102 seats in the previous parliament.  The coalition will control key committees.  This marks the first time in a decade that the government coalition has a majority in both houses.  In theory, the government has the wherewithal to legislate controversial economic reforms.  But the LDP as always is highly factionalized, so considerable uncertainty persists for investors whether the government will exercise its newfound power to enact needed structural reforms.

Dollar/yen traded overnight in a wide 100.63 – 99.31, but the yen shows a net 0.4% advance.  EUR/YEN traded as high as 131.14 and as low as 132.25.

The U.S. currency has also fallen 0.4% against sterling.  It has posted losses of 0.3% against the euro and Swiss franc and 0.2% versus the loonie and Aussie dollar.  The dollar, in contrast, has edged up 0.1% against the kiwi and yuan.  An earthquake in New Zealand of 6.5 magnitude weighed on New Zealand’s currency.

In the Pacific Rim, share prices climbed 0.7% in Singapore and 0.5% in Japan, China, Taiwan and South Korea but fell by 1.0% in Indonesia and 0.4% in Australia.

Equities in Europe are up 0.4% in Italy, 0.3% in Spain and 0.1% in France but down 0.2% in Britain.  The German Dax is unchanged thus far.

The ten-year Japanese JGB has dropped three basis points and through 0.80% to 0.78%.  The 10-year German  bund edged down a basis point, while the British gilt is steady.

Gold advanced 1.8% to $1316.30 per ounce.  Oil rose 0.6% to $108.66 per barrel.

This Monday offers investors a very short data release calendar.

  • Swiss M3 money growth accelerated to 11.6% in June from 9.7% in May.
  • CPI inflation in Hong Kong accelerated 0.2 percentage points to 4.1% in June.
  • Malaysian joblessness rose 0.3 percentage points to 3.4% in May.
  • Export orders unexpectedly fell 3.4% on month and were 3.5% lower in June than a year earlier.  Such recorded an on-year decline of 1.7% in the first half of 2013.

A statement was released by G20 finance ministers and central bankers, who met in Moscow, that promises to intensify pro-growth policies.

U.S. existing home sales and the monthly Chicago Fed National Activity Index get released today.  Mexican retail and wholesale sales data also get reported.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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