Japan's political arena has undergone a significant upheaval. On October 27th, the results of Japan's 50th House of Representatives election were announced, and the ruling coalition of the Liberal Democratic Party and Komeito failed to secure more than half of the seats, drawing widespread market attention. On Monday (October 28th), the yen dropped sharply against the dollar, hitting 153.69, the lowest point in three months. Meanwhile, the Japanese stock market also saw a decline in early trading but then reversed the trend.
In this election, a total of 1,344 candidates competed for 465 seats in the House of Representatives. The coalition of the Liberal Democratic Party and Komeito fell short of the majority with 233 seats, securing only 215 seats, of which the Liberal Democratic Party obtained 191 seats and Komeito 24 seats. Compared to the pre-election count of 247 seats, the Liberal Democratic Party lost 56 seats, challenging its political standing.
The Constitutional Democratic Party performed well in this election, becoming the second-largest party in the House of Representatives, winning 148 seats. Party leader Yoshihiko Noda stated that the goal of this election was to weaken the Liberal Democratic Party's dominance, and the current outcome is a significant achievement. He plans to engage in "sincere dialogue" with other parties opposing the continuation of the Liberal Democratic Party's governance to seek cooperation this week.
The market reacted swiftly to the election results. In Asian trading, the yen fell 0.9% against the dollar, marking the yen's fifth consecutive week of decline. Analysts pointed out that the depreciation of the yen might prompt Japanese authorities to intervene in the foreign exchange market again to stabilize the currency.
Although the depreciation of the yen is usually beneficial for Japanese export-oriented companies, thus supporting the stock market performance, political uncertainty has caused investor concerns, questioning Prime Minister Shigeru Ishiba's leadership. Ishiba, elected as Prime Minister earlier this month, quickly dissolved the House of Representatives, the fastest in postwar history. However, the current election result poses a test to his governance capabilities. The market will closely watch the political developments in the coming weeks to gauge whether Japan’s political situation can stabilize again.
