In our view, the LDP coalition's maintenance of a strong two-thirds majority in this election will greatly help Prime Minister Abe and his party's reform efforts, while likely bolstering Yen weakness to some degree. This is a common view, but one item that is not often discussed is that not only will this victory help push forward economic reform momentum in government ministries (and the politicians aligned with such ministries), but also in the business community. The lack of significant wage increases (as strongly requested by Mr. Abe previously) has been a major reason why Abenomics is not working very well for individuals (and thus, personal consumption and GDP growth in general), but this victory should help him convince companies to be more pro-active in this regard.

Corporate profit margins are at a historical high, corporate taxes have been already cut (with promises for more) and Japan requires a broadly spread distribution of economic benefits for the recovery to be durable, so it is logical that corporations will raise wages. Indeed, if certain companies do not, it is entirely possible that Mr. Abe will publicly point this out rather directly.

Another major result of the Japanese election is that now that the US Congress will soon likely pass "Fast Track" legislation, serious negotiations for the Trans-Pacific Partnership (TPP) are approaching, and companies (especially in the auto sector), along with farmers and voting public, will realize that this partnership is inevitable in order to better integrate Japan in the region and modernize its overall economy. Many global investors consider TPP to be the most important "third arrow" component, so resolution of such would be a major achievement for Abenomics and the country overall.

Given the above, and the parts of Abenomics that are already well set in motion, we expect the prospects for the economy and risk assets in Japan to improve even further in the coming quarters.