Finally, the election.

- The premise of the shaky continuation of the LDP-Komeito ruling coalition, the yen exchange rate is already in a downward trend.

- Based on past examples, aside from a landslide victory for the LDP, stocks tend to either decline or slightly rise.

If the coalition ruling party of the Liberal Democratic Party and Komeito falls below the majority in the House of Representatives election voting on the 27th, there is a possibility that the yen exchange rate and Japanese stocks will further decline. Japan's long-standing stable politics could suddenly become more fluid, potentially limiting the timing for additional interest rate hikes by the Bank of Japan.

According to recent public opinion surveys by various media outlets, the headwinds against the LDP over the secret funds issue have made it a delicate situation for both ruling parties to secure a majority.

In the financial markets, even if the LDP-Komeito coalition falls below the majority, there is a high likelihood that they will remain in power through a coalition government with the National Democratic Party or through external cooperation. However, it seems inevitable that there will be increased selling pressure on Japanese stocks and the yen due to political uncertainties.

Pictet Japan's Senior Fellow Shinichi Ichikawa notes that even if the LDP-Komeito coalition falls below the majority, it is unlikely that the opposition parties will unite to nominate a prime minister, and the framework of power is unlikely to change significantly. However, he also points out, "It is certain that the administration will become more unstable."

Considering the upcoming House of Councillors election next year, there is a growing sentiment within the Liberal Democratic Party that they may not win the election as it stands, with ample possibility of a redo of the party leadership election. They also see the potential for a simultaneous election for both the House of Representatives and the House of Councillors in July next year.

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Today in the Tokyo stock market, there is a lack of buyers causing a gradual decline. Depending on whether the ruling coalition secures a majority with either a clear majority or falls short of a majority, the reaction of the stock market could vary significantly. In the latter scenario, due to uncertainty about the future of the administration, there is concern that the market may react quite negatively.

On the other hand, even in the case of falling short of a majority, if the post-election framework involves a coalition with either the Ishin Party or the Democratic Party for the People, both parties are inclined towards proactive fiscal policies. This balance may surprisingly be positive for the stock market. However, if the cooperation remains limited to outside the cabinet, including with Ishin and the Democratic Party for the People, the aforementioned positive factors may weaken. This could lead to negativity for the stock market due to the instability of the administration, with concerns of prolonging the situation.

However, just like Nidec this week, there are stocks that experience significant price increases due to strong earnings announcements. Therefore, on an individual stock basis, depending on how the earnings announcements unfold starting next week, there might be attractive buying opportunities immediately after the election.