DPJ Losses A Further Blow To Economic Outlook

BMI View: Following the ruling Democratic Party of Japan (DPJ)'s poor showing in the July 11 Upper House elections, the outlook for the Japanese economy has gone from (very) bad to worse. In the short term, if we are correct in our view of a global slowdown in 2011, Prime Minister Naoto Kan could find it difficult to push through take hikes and spending freezes outlined in his recently-unveiled fiscal consolidation strategy. Over the medium term, a weakened executive reinforces our conviction that Japan will be unable to avert a serious credit event in the coming years.

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