Japanese election and more uncertainty

Throw the bums out! That is what the Japanese said with their recent election. The DPJ trounced the LDP with the DPJ holding 308 seats in the 480 seat lower house of the Diet. This is not normal Japanese behavior but then these are not normal times. What became a bad recession from a real estate bubble turned into the lost decade, but now we are closing in on a second decade of no growth. Japan will lose their position as the number two economy to China and there is no end in sight. Nominal GDP is at about the same level seen in the early 1990's. Child poverty is higher than the OECD average.

Monetary policy with zero interest rates have been tried. Fiscal stimulus has been tried and then some with debt to GDP enough to make any country shutter. So it is time to try something totally different like end the one party rule for the last 50 years. Unfortunately, it is not clear that the new party has some magic formula for solving the economic woes of Japan. The slogans suggest that there will be more consumer focus and less same old policies to support large businesses, but it is unclear how this will be implemented.

So what does this mean for investors? A lot more uncertainty which is not good. More of the same will not change the economic dynamics but there are limited choices of what to do as an alternative.