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MNI: Race To Lead Japan's LDP To Impact Future BOJ

One of four candidates for the Liberal Democratic Party presidential election will emerge on Wednesday with all onboard with large-scale fiscal spending to support an economy facing downside risks caused by a prolonged coronavirus pandemic and general support for current monetary policies.

The candidates are former foreign minister and LDP policy research chief Fumio Kishida, administrative reform minister Taro Kono, former communications minister Sanae Takaichi,r and Seiko Noda, a former minister for internal affairs and communications. All four also remain cautious about modifying Abenomics, including bold monetary easing, with current Governor Haruhiko Kuroda's term ending April 2023.

The next BOJ meeting Oct. 27-28 is expected to downgrade the near-term economic outlook with a general election date not yet set, see: .MNI STATE OF PLAY: Evolving Risks, Data Vital For BOJ Oct Meet.

POLICY CONTINUITY

The BOJ is highly expected to maintain the current policy framework set under Kuroda.

But the focus is shifting to new governor and deputy governors to be appointed by the next administration in early 2023.

Masayoshi Amamiya, who is currently Deputy Governor, is a career central banker considered the top contender to replace Kuroda.

A new prime minister would have a strong influence on the outlook of BOJ monetary policy under a new governor.

CHANGES AFTER KURODA

Still, there is talk in the markets that the BOJ could revise its unconventional monetary easing, including a joint statement made in 2013 to make the 2% inflation target more long-term, and keep negative interest rates, under the new administration.

The campaign to lead Japan's ruling LDP, which has dominated Japanese politics post-war, officially began on Sept. 17. The winner will likely become prime minister because of the ruling coalition's majority in the powerful lower house and will take the party into a general election in November.

The LDP presidential race will count 382 votes from lawmakers in the Diet, as well as 382 other ballots from party members and supporters nationwide. If no candidate receives more than 50% of the vote, the two front-runners head into a runoff.

The two candidates in the runoff will fight for the same 382 Diet votes, plus 47 votes representing each of Japan's prefectures.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
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MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
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