Photo: shibuya246 on flickr
Japan’s current prime minister Naoto Kan has successfully defended his position against the challenger Ichiro Ozawa today, and it’s sent the yen to a new high vs. the dollar. The Japanese stock market is down, apparently in response as well.Mr. Kan won a membership election buy a wide margin of 721 to 491 votes, and was the 3-1 favourite amongst the public according to Bloomberg. It was a huge victory.
What’s interesting is that the defeated Mr. Ozawa was pushing to increase stimulus spending and take a far tougher line against the strengthening yen, including direct intervention in the currency market.
Thus we’ve seen an interesting rejection of Japan’s classic stimulus/yen intervention economic policy, even as the yen is extremely strong and the economy is weak. Kan meanwhile is trying to reduce tax rates, cap debt issuance, and pushes a relatively (relative to Japan) more austere spending policy. Japan could still intervene in the currency market, but it’s now far less likely to happen than yesterday.
Japan seems unwilling, finally, to simply repeat the same questionable strategies of the past. This may have unnerved the Japanese stock market today, but seems positive for the long-term.