STOCKS | Analysts: Sanae Takaichi’s Falling Approval Rating May Weigh on the Yen and Japanese Bonds

Market strategists said Japanese Prime Minister Sanae Takaichi’s declining approval rating could push the government toward a looser stance on spending and tax policy, raising investor concern about Japan’s currency and bond markets. According to Jin10, Nomura Securities chief strategist Naka Matsuzawa said that if poll data continues to worsen, the government may push more aggressively to advance existing policies, which would be negative for Japanese government bonds and the yen.

According to Jin10, Takaichi had previously pledged to cut the food consumption tax, but that promise has yet to be fulfilled and has drawn criticism from some people as fiscally unreasonable. Matsuzawa said that if the government further strengthens its reflation policy efforts, it would pose a threat to global bond markets and the yen, and could also weigh on Japanese stocks because it may mean the government’s ability to implement policy is declining. SMBC Nikko Securities strategist Rinto Maruyama also said public dissatisfaction with the government mainly stems from its failure to respond effectively to rising prices, and that this dissatisfaction will become a factor pushing the government to further expand fiscal spending and strengthen related measures.