Archived IMT (2009.08.27)

SUNDAY's JAPANESE ELECTION is widely expected to usher in a new party in power--Democratic Party (DPJ), ending the 54-yr domination of the incumbent & scandal-ridden Liberal Democratic Party. DPJ is known to respect the central bank's independence more than the ruling Liberal Democratic Party. In the past, LDP lawmakers have publicly forced the BoJ into quantitative easing (2004-2005) and even into weakening the yen. January 2007 was the most visible and recent example of LDP interference when the BoJ was forced to hold rates unchanged instead of raising them as was widely expected. Yet it is perceived that the Democrats would try to exert more BoJ control by nominating candidates more supportive of Party economic policies. Theres only 1 vacancy at the (9-member policy board and the next vacancy comes up in December. In the past, polticial changes have rareely had an impact on the yen. We reiterate that JPY has outperformed USD in 8 out of the last years in August, especially between late August into 1st week pof Sep.