Market strategists warn a decline in Prime Minister Takaichi’s approval could
push the government toward looser fiscal and tax policies, increasing downside
risk for the yen and Japanese government bonds. Japanese polls show her support
has fallen to a post-inauguration low, though it remains above 50%. Nomura’s
chief strategist said further slippage in polls could prompt the government to
accelerate reflationary measures, negative for JGBs and the yen and potentially
bearish for Japanese equities as a signal of weakened policy capacity.
Takaichi’s campaign pledge to cut the food consumption tax has not been
implemented and faces fiscal criticism. SMBC Nikko’s strategist added that
public dissatisfaction over rising prices could spur further fiscal expansion
and stronger measures.
