What will probably happen is they will knuckle down and vote for reform. Things are getting better in Japan and the architect of that appears to be moving toward retaining power.
The expectation is that Koizumi will win by a reasonable majority, that reforms will go forward and the opposition to the Japan Post sale will be crushed.
This is the first clear warning in a very long time by the U.S. that Japan should not cap the rise in the yen. The yen is the cheapest it has been for 20 years and will inevitably regain ground.
The GDP deflator suggests the Bank of Japan doesn't have to do anything any time soon and this is negative for the yen. Previous expectations for an imminent tightening were clearly premature.
The comments by Tim Adams were a bombshell. This is the first clear warning in a very long time by the U.S. that Japan shouldn't cap the rise in the yen. The implicit assumption is the yen will indeed strengthen.