Does Victory For Abe Mean Defeat For The Yen?

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Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR), AdvisorShares Gartman Gold/British Pound ETF (GGBP), AdvisorShares Gartman Gold/Yen ETF (GYEN) and AdvisorShares International Gold ETF (GLDE), share their thoughts about the gold space.

Prime Minister Shinzo Abe prevailed on Sundays snap election which will give Abe a fresh mandate to implement his policies to revive Japan from its prolonged well chronicled economic malaise.   There was no way Abenomics wasn’t going to continue since Abe’s LDP party had 352 candidates to the opposition Democratic Party of Japan fielding only 198 candidates for the 475 seats up for grabs.

Abe’s strategy of depreciating the Japanese Yen through aggressive monetary policy was commended by most however increasing the VAT or consumption tax to 8% has put the brakes on the economy.  In fact some data released in November has shown the economy surprisingly quickly slipped into recession after the April 2014 hike from 5-8%.   Abe has announced a delay to the proposed further increase to 10% consumption tax slated for October 2015 to April 2017.   This was the culprit of the plunging approval ratings which inspired Abe to dissolve parliament and call for the Dec 14 election.   Abe chances would have been diminished the longer he waited as the country’s conditions atrophy. 

Structural problems still persist with Japan’s aging and shrinking labor force and their draconian immigration policy.  Anecdotes abound of school closings in rural areas and quirky societal changes that are the result of the ageing problem in Japan.   China’s declining growth numbers augment the speedy recovery Abenomics is supposed to foster.   The majority of global investment banks currently project USD/JPY to continue its upward trend with the outlier prediction of 200 USD/JPY.

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