Japan Investors Forget Spending Fears to Endorse Takaichi’s Mandate

Less than a month ago, bond markets had a meltdown over Japanese Prime Minister Sanae Takaichi’s plan to cut taxes on food. After her gamble to call a surprise winter election secured the biggest victory for a single party since World War II, investors seem willing to give her the benefit of the doubt.

Japan’s equity benchmark surged almost 4% to a fresh record high on Monday while the yen and government bonds stayed noticeably calmer than many had feared following weeks of volatility fueled by concerns about fiscal sustainability. While longer-tenor Japanese bond yields initially jumped, they quickly pulled back, easing concerns of a disorderly selloff that fueled January’s bond rout.