Takaichi's Win Reshapes Global Markets, Japan's Bond Yields Surge
Sanae Takaichi, a Japanese politician admired by Margaret Thatcher, has been elected as the president of the Liberal Democratic Party. This win sets the stage for her to become Japan's first female Prime Minister in October 2025. Markets are already reacting, with a rise in Japanese government bond yields and a phenomenon dubbed the 'Takaichi trade' emerging.
Takaichi's pro-stimulus platform, featuring cash handouts and tax rebates, has sparked expectations of expansionary fiscal policy. Goldman Sachs predicts this could trigger a sharp jump in Japan's borrowing costs, with a 10-15 basis point increase in 30-year Japanese government bond yields deemed plausible. This rise in yields is already spilling over into long-term bond yields in the UK and other countries.
In the UK, the Office for Budget Responsibility is preparing its forecast to determine the fiscal tightening needed. Chancellor Rachel Reeves is gearing up for the autumn Budget, expected to include £30bn of tax rises. The rise in Japanese government bond yields could lead to a 3 basis point increase in UK government borrowing costs, adding pressure on the UK's fiscal situation.
Takaichi's win and her expansionary fiscal plans are reshaping global markets. Investors are adjusting their portfolios, and governments are preparing for potential impacts on their own fiscal positions. As Takaichi's confirmation as Prime Minister approaches in October 2025, the global financial landscape is expected to continue evolving in response to her policies.
