States of emergency may end before LDP election

Reports this week that PM Suga is keen to end emergency declarations before leaving office on Wednesday are good for our view that output will rebound strongly to above pre-virus levels in Q4. Crucially, high vaccine coverage should ensure the lifting of most restrictions is permanent this time around. While the LDP leadership contest is set to be a close-run thing, Kono Taro remains the favourite. Were he to become PM, Mr Kono would be likely to distance himself from Abenomics and instead pursue an economic policy agenda more focused on deregulation and raising household incomes.