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9:29 AM · 28 October 2024

Chart of the day: JP225 (28.10.2024)

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Japan's Nikkei (JP225) is gaining 2.9% while the Japanese yen is losing 0.26% against the dollar after Japan's ruling coalition lost its majority for the first time in 15 years. As a result, there may be a perception that the normalization of monetary policy will proceed more slowly under the pressure of political uncertainty.

According to estimates, Prime Minister Shigeru's Liberal Democratic Party (LDP) could end up with 154 to 219 seats in the 475-seat chamber as a result of Sunday's vote, meaning it will not win an independent majority of 233 seats. Moreover, the LDP's coalition partner, the Komeito party, also failed to reach the required number of seats to form a joint government.

As a result, it is most likely that the LDP and Komeito will join forces with one or two smaller parties to reach the 233 seats needed to govern. 

What does all this mean for the markets? It now seems that the BoJ will want to see how quickly the political uncertainty subsides once a coalition majority is formed. Otherwise, the BOJ may have to delay further interest rate hikes until next year.

The JP225 index is gaining 2.9% today and has broken out above the 50- and 100-day exponential moving averages, confirming a rebound from the lower limit of the upward channel on the instrument. Source: xStation 

 

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