One final point. One of the risks to my view on Japan is that the early election on December 14 could produce a nasty surprise for Prime Minister Abe and the ruling Liberal Democratic Party (LDP) coalition. While market participants see the LDP losing a few seats in the lower house of the Parliament, they are not expecting the ruling party to give away its majority, something that could be a risk factor.
But on the contrary, based on my conversations with Japanese investors and a recent article in a local newspaper, a seemingly lack of viable candidates from the rival Democratic Party of Japan (DPJ) suggests that the LDP may actually increase its majority. To the extent that a bigger majority emerges and the prime minister uses the mandate to push forward more aggressively on structural reforms, I believe Japanese stocks may continue to rise.
Source: Bloomberg
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.