The politics that investors seem most interested in is the Greek election on January 25, three days after the ECB meeting. However, there is another election that is receiving practically no attention, but could be very revealing. The prefecture of Saga in Japan holds an election Sunday that could give insight into how much Prime Minister Abe is going to be able to enact his reforms.
Remember that even before last December's election, the LDP and its junior coalition partner enjoyed a super-majority in the Diet. Yet reforms, the third arrow of Abenomics, have been mostly disappointing. The main obstacle is not the opposition. It ran a poor campaign and did not offer much of a substantive alternative to Abenomics.
Rather the main hurdle to real structural reforms is the LDP itself. It is a coalition, like most major parties. There are forces of order and forces of reform within the LDP. Abe himself has a foot in both camps. His appointments and policies reflect this.
The election in Saga pits an agent of reform, Hiwatashi, the ex-major of Takeo (a city in Saga) against Yamaguchi, an ex-bureaucrat. These are the two main candidates. Hiwatashi is supported by the LDP in Tokyo (Abe). However, some parts of the LDP are supporting Yamaguchi. This seems especially true of the Japan Agricultural Cooperatives (JA).
Hiwatashi enjoys a small lead according to the polls, though Yamaguchi appears to have narrowed the gap. There appears to be greater misgivings of Abenomics in Japan than the super-majority that the LDP-led coalition secured again would suggest. If Yamaguchi draws the protest vote and wins, it could stymie Abe's third arrow, and invigorate the resistance to significant concessions in the Trans-Pacific Partnership trade talks.
That said, the election in just one confrontation between the agents of change and the agents of order in a larger struggle over Abenomics and the soul, if not the future of Japan. It may not the decisive battle, but it offers insight into the early days the Abenomics 2.0.