Economist: Japanese election results expected to boost the stock market but push up bond yields

Glonghui, February 9th — Ray Farris, Chief Economist at Eastspring Investments, pointed out in a report that the election victory of Japanese Prime Minister Sanae Takaichi is seen as positive for the Japanese stock market. He expects Takaichi to adopt a more expansionary fiscal stance, including abolishing the consumption tax and increasing defense spending. Farris added that any new fiscal stimulus measures could boost the economy and extend the growth cycle. He anticipates that corporate earnings forecasts for 2027 will be revised upward, and the proposed consumption tax reduction may take effect in April 2027. However, additional stimulus measures will push up Japanese government bond yields, with the 10-year government bond yield expected to rise above 2.4% in the coming quarters, which will support underlying inflation and may slow or reverse the recent downward trend in public debt.