Japan has a reputation as an orderly, well-behaved society.
While this reputation is deserved, it's actually quite odd when you consider how tumultuous the country's politics are.
Japan has gone through six prime ministers in as many years. It's about to get its seventh. And anyone living outside the country would be hard-pushed to name any one of them.
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So you might be tempted to dismiss all the excitement over the latest election.
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But you'd be wrong. This is one occasion in which politics could actually make a real difference
Why is the market excited about Abe's return?
Shinzo Abe has already had a crack at being prime minister of Japan. Between 2006 and 2007, he was the top man before stepping down due to ill health. Now he's back at the head of the Liberal Democratic party (LDP).
In between times, the country has experienced the global financial crisis, the Fukushima disaster, and an ongoing wrestling match with deflation.
The population is clearly getting fed up. In 2009, the Japanese voted for change. They ditched the LDP, which had been in power almost constantly since 1955, in favour of the Democratic Party of Japan (DPJ).
Now they've got tired of the lack of progress under the DPJ. They've brought Abe back in a landslide victory, which should make it easier for him to push through the various changes he wants to make.
So why are the markets getting so excited? The Nikkei 225 has risen by 8% in the past month alone.
It mostly comes down to Abe's plans for the Bank of Japan (BoJ). Even although Japan is often seen as the birthplace of quantitative easing (QE), the country has in fact been far less aggressive with money printing than the US or the UK.
Abe wants that to change. He wants the BoJ to target inflation of 2% rather than 1%. And yesterday he was piling on the pressure ahead of the BoJ's next meeting, which happens this week.
"It is very unusual for monetary policy to be a focus of attention in an election. But there was strong public support for our calls to beat deflation. I hope the Bank of Japan takes that into account," he said.
A higher inflation target means more money printing. And more money printing means a weaker currency. In anticipation, the yen has already weakened sharply against the dollar, falling to a near-two-year low. And that should be good news for Japan's embattled but vital export sector. This in turn, is what has helped the Nikkei to surge back towards the 10,000 mark.
There's more to Japan than just weakening the yen
But while the assault on the yen is the biggest headline-grabber, it's hardly the only reason to like Japan.
There's its banking sector. Having been through the sort of crisis that everyone else's banks are still recovering from, Japan's banks are in much better shape than almost any other developed world banking sector.
As James Ferguson has regularly pointed out, Japanese banks no longer need to focus on fixing their balance sheets. As a result, lending by the banks could expand greatly if they just have the incentive to do so.
Meanwhile, there are already signs of life in the stock market, which have little to do with the weak yen. According to Australian financial group Macquarie, more money is set to be raised this year from new companies floating, than from already-listed companies issuing new shares. That's the first time this has happened since 1999.
Why is that good news? Because, says Macquarie, a recovery in the number of new listings could "spur greater participation by Japan's retail investors". In other words, it'd get the punters on the street back into the stock market.
As for the downsides: the nation's poor demographics are constantly cited as one big reason to be sceptical of Japan. But demographics don't have to be a problem if the culture is willing to change a little.
We're not even talking about increasing the birth rate here, or taking a more relaxed view of immigration. Japan is already sitting on a lot of untapped potential: its potential female workforce.
The International Monetary Fund reckons that Japan could lift GDP by as much as 8% a head if the number of women in the workplace rose to northern European levels, reports Mure Dickie in the FT.
The main point to take away from the election result is that the Japanese people are clearly getting fed up with the condition of the economy. As Abe pointed out, you don't normally get voters excited about intricate details of monetary policy, but that's not the case here. If the people want change, they'll get it and in this particular case, that's exactly what Japan needs.
We'll have more on the changes in Japan in the next issue of MoneyWeek magazine, out on Friday. We'll also be discussing the best ways to get exposure to the country in our New Year roundtable, in our first issue of 2013. If you're not already a subscriber, give yourself a pre-Christmas treat - you can subscribe to MoneyWeek magazine.
This article is taken from the free investment email Money Morning. Sign up to Money Morning here .
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