Following a landslide victory in the Upper House elections, Prime Minister Abe has confirmed that the government will prepare a large supplementary budget later this year. All else equal, this should lift growth and lessen the need for additional monetary stimulus. However, we still remain convinced that the Bank of Japan will step up the pace of easing later this month. Markets have come around to our view following a visit of former US Fed chairman Ben Bernanke to the BoJ, so the recent weakening of the yen against the dollar should continue.
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