Japanese Upper House Election

Today, the Japanese Upper House Election took place in Japan. As the polls predicted, the Democratic Party, dominant party in the lower house seems to have failed to keep the majority number of seats, leading to a so called 'Twisted Diet' meaning dominant parties being different in the upper house and the lower house. As a lot of people have predicted, especially foreign people, this could lead to a much tougher decision making process in the Diet, and stagnation in Japanese politics. Things were beginning to change in a better way, with much more transparancy, but this concequence could trigger uncertainty in many aspects.


The worst case senario could start from a selloff in the Japanese stock market from foreign people, proliferating fears of the weakening Japanese budget. Tomorrow's Nikkei could be a major indicator of the near term future of the Japanese economy.


But is the Japanese economy really weak? I don't think so. As a matter of fact, a lot of Japanese corporations have successfully restructured their balace sheet in the aftermath of the recent subprime crisis. Especially, their cash balances are extremely rich, and this should not be underestimated.


What I want to say to my forein friends is not to sell the Japanese stocks if you have them in possession by chance, merely from fear of Japan faling to cope with the finiancial deficit as a concequence of the 'Twisted Diet'. My biggest concern for the time being is that pessimism being the majority of investor sentiment, leading to a sell off in not only the stock market but also other financial markets, thus creating a huge shock that could even create another financial crisis. You can already see this kind of sentiment in the European market, but that could be passed on to the Asian market, and the whole world.


There are signs of recovery in all parts of Japan. Japan has to change, and is beginning to change. The 'Twisted Diet' is indeed bad news, but is merely a structural problem in the diet, and most polititians in the administration seems to know what should be done to prevent a disaster from happening. I still do want to think my country has the potential to recover its pride and eager of necome the golden country of Zipangu..