Shinzo Abe’s scandal headaches raise uncertainty over Abenomics and the future of Japan’s long, slow recovery. But there are reasons investors should stay the course.
For Japan watchers, the issue of the day is the political future of Prime Minister Shinzo Abe. Heading into an intra-party vote in September, where victory could make him the longest-serving prime minister in modern times, this politician with nine lives is once again battling public displeasure given a new round of scandals. While Abe has denied the latest charges, those and other alleged instances of cronyism in his administration have cast doubts on his future as the nation’s leader, as well as on the future course of Abenomics. The rising level of uncertainty, of course, has markets on alert.
While this has dragged down the Liberal Democratic Party in the polls, Abe retains great support within the party, maintaining a 10-percentage-point lead. Whether Abe resigns, which some consider possible after the current parliamentary session ends in June, or he loses out to a rival within the Liberal Democratic Party, it is likely that much of the economic policy steps he has supported will continue. In fact, the current political brouhaha appears to be much more about Abe’s personality than his policies, which are broadly popular.
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