- Government, BOJ needs to tie up on economic policy
- Will coordinate closely with boj on it
- Japan’s economy is relieved
- The government needs to bear responsibility in both fiscal and monetary policy
- Never denied the importance of fiscal discretion
- To increase wage growth requires sharp support for weak little medium -sized companies
- A policy option is to increase subsidy to local governments
- Will not refuse to reduce consumption
As mentioned earlier, Takaichi has a firm belief to mark the return of “abenomics” and means that he will have more expansion agenda. In short, this means that possibly locks the head with BOJ, while want to increase rates during an increase in spending – which would be a pure negative for Japanese bonds.
The potential response we may receive tomorrow in the open can be a weak yen and perhaps some of the yield curve of Japan. The JGB market reaction may be more mixed to balance the outlook on the BOJ, as well as to balance its fiscal discovery. I will not expect a very strong response and all this is a possibility that should fade through the day/week.
Circling back on the BOJ, it will almost certainly close any opportunity of a rate hike in October. And a single closure is likely to be closed in December. At least until the political dust is cleared and the Takachi settles, especially in the context of managing its strategy in working with the US on business.
On that front, she is a radical and nationalist, so we have to see how she wants to balance any attitude in dealing with Trump and his tariff. But amidst the fragmented nature of the LDP party, it may have to focus more on domestic issues rather than shaking the boat on international affairs for now.
