MARTIN SLANEY<br /><strong>HEAD OF DERIVATIVES, GFT</strong><br /><br />CHANGE is in the air in Japan. For more than 50 years the conservative Liberal Democratic Party enjoyed virtually unbroken rule. Unhappy with record unemployment and the problems of an ageing population, the centre-left Democratic Party. This may well herald a honeymoon period for the new government but is the Nikkei, Japan&rsquo;s benchmark stock index, also likely to benefit?<br /><br />Certainly, the huge majority gained from its landslide victory should in theory lead to a more stable political landscape, and the absolute removal of any uncertainty which may have been a factor pre-election is always a &ldquo;good thing&rdquo; for stock markets in general. International funds which had previously been &ldquo;underweight&rdquo; on Japan may well start loading up on the area. The Nikkei itself has risen in line with global stock markets this year, up 50 per cent to the mid-10,000s, a veritable bullet train ride from its March lows, when a banking-led sell-off caused a dip below 7,000 for the first time since 1982.<br /><br />However, I would be wary of getting long of Nikkei CFDs in the aftermath of this election. The change in power and the size of the victory had been predicted for some time, and so is virtually fully priced in to the market. Although a win for the LDP would almost certainly have had a negative knock-on effect on the market yesterday, the LDP was traditionally regarded as more business-friendly, whereas the Democratic party promises reform to social welfare as its major pledge.<br /><br />There are just too many question marks for me. It is too early to call what the new government might achieve and we can expect disappointment to set in relatively soon. GDP is unlikely to make any real turnaround until 2011.<br /><br />It&rsquo;s fairly safe to say then that what will determine direction for the Nikkei, as soon as any post-election euphoria has died down, is simply more of the same: US stocks, the Shanghai market, global recovery hopes and oil.