Takaichi Wins Landslide, Japan Enters New Era
Prime Minister Sanae Takaichi secured a landslide election victory, hailed as the biggest in postwar Japan, and the impact was immediately felt in the markets. Japanese stocks soared, bond yields rose, and the yen fluctuated wildly—signs that investors were bracing for a period of more aggressive government spending.
The ruling Liberal Democratic Party (LDP) achieved remarkable results after stumbling last summer. National broadcaster NHK (National Broadcasting Corporation) reported that the governing coalition secured 352 seats in the lower house of parliament, far exceeding its previous slim majority.
Most strikingly, Takaichi's party secured two-thirds of the seats in parliament, securing 316 of the 465 seats. This "supermajority" significantly smoothed the government's path to passing legislation, including on sensitive issues like constitutional amendments that could spark renewed debate over Japan's defense policy and pacifist identity.
This victory also felt personal for Takaichi. He had risked his position in a snap election, promising to step down if his coalition failed to secure a majority. That gamble paid off handsomely for his political opponents: seven months after his party briefly lost control of parliament, he now regained full control.
In the markets, the "Takaichi trade" immediately came to life: the Nikkei 225 index briefly surged to 5.7%, while the yield on 10-year government bonds rose to around 2.275%. Investors believed a strong mandate opened the door to a larger fiscal stimulus—good for stocks, but typically depressing bonds due to concerns about financing and inflation.
The most closely watched issue was the planned consumption tax cut for food. Takaichi mentioned a two-year suspension scheme without issuing new bonds, but acknowledged that it still required cross-party discussion. The estimated cost of this policy is not small—around ¥5 trillion per year—and this is what caused tension in the bond market because the source of the funds was not yet fully clear.
Meanwhile, the yen became a sensitive point. Takaichi's comments, which were initially perceived as "benefiting from a weak yen," put pressure on the currency, before he said his remarks were misinterpreted and emphasized his focus on a strong economy without being shaken by the exchange rate. The government, through Finance Minister Satsuki Katayama, stated that it is continuing to monitor the market, and currency official Atsushi Mimura admitted to being vigilant with a sense of urgency—as further weakening could approach levels that previously triggered intervention.
On the monetary policy side, the challenges for the Bank of Japan are growing: a weak yen could add to inflationary pressures (pushing interest rates up), but tightening too quickly risks undermining the recovery. Even Donald Trump offered his congratulations, adding to the global spotlight on Japan's new leadership—which now appears much more stable, but also brings a list of major decisions that will be tested by the market starting this week. (asd)
Source: Newsmaker.id
