on the upcoming election in Japan

Robert Alan Feldman (Morgan Stanley) on the upcoming election in Japan.

Thus, the likely outcomes range from a slim victory to a large defeat for the LDP. How would policy change across this range of outcomes?

The implications depend on two factors. (a) First is the ‘Kobayakawa Factor’ — the incentive for the right-wing inside the DPJ to bolt, form its own party, and join the coalition. (At the Battle of Sekigahara in 1600, a small force led by Hideaki Kobayakawa had pre-arranged to defect to the side of the Tokugawa forces during the course of the battle. After much dithering, Kobayakawa eventually kept his promise, and decisively turned the battle.) (b) The second is the ‘Macbeth Factor’. The worse the outcome for the LDP, the stronger is the likelihood of an anti-reform Macbeth toppling PM Abe. When such a possibility grows, there is an incentive for PM Abe to ‘go for broke’ by pushing economic reforms aggressively.
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Thus, even if the coalition does retain its majority in the Upper House, the Abe government will be scared about the next Lower House election. This fear will likely tilt toward more aggressive economic reforms. If the LDP has a slim loss of majority, there will be a double incentive for more aggressive reform, from both the Kobayakawa Factor and the Macbeth Factor.

Mr. Abe’s Choice — Faster Reform, or Much Faster Reform