Fixed Income Commentary

Implications of Takaichi's LDP election victory for exchange rates and JGB yields

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Implications of Takaichi's LDP election victory for exchange rates and JGB yields

Key points
  • Sanae Takaichi, proponent of "responsible, proactive fiscal stimulus," is elected LDP president and seeks to prioritize measures aimed at addressing rising prices
  • By pursuing easy fiscal and monetary policy, Takaichi cabinet would encourage continued market expectations of rising stock prices and weaker yen
  • Takaichi makes reference to Article 4 of Bank of Japan Act; Governor Ueda's cautious comments on US economy reduce likelihood of October rate hike
  • JGB curve likely to twist-steepen initially, and special attention should be paid to super-long sector

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