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Firms wait for cost decisions after Japan election

Advisers and fund managers say the Democratic party’s landslide victory in the Japanese general elections has not changed the immediate investment outlook.

The Democratic Party of Japan took 64 per cent of the votes in last week’s elections, while prime minister Aso’s Liberal Democratic Party won less than a quarter of the seats.

Schroders head of Japanese equities Shogo Maeda says all the polls predicted the landslide so the market has had plenty of time to discount the result. Maeda says: “Investors will be keenly watching to see which of the manifesto promises are actually implemented. It already seems clear that some of the higher-cost elements will be scaled back or abandoned and this may prove a popular move, given the growing unease over government finances.”

Jupiter Japan income fund manager Simon Somerville says the win will result in a redistribution of wealth and warns that the bureaucratic cost-cutting may not be enough to pay for these policies which may further inflate public debt and increase long-term interest rates.

Plan Invest Group managing director Michael Owen says: “I would say it is more a case of wait and see with Japan at the moment.”

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