Japan markets brace for historic electoral win by PM Takaichi

Impact of Takaichi's Election Victory

TOKYO, Feb 9 (Reuters) - Japanese Prime Minister Sanae Takaichi's coalition swept to a historic election win on Sunday, handing her a mandate to follow through on a pledge to cut taxes and reflate the economy through spending.

Market Reactions

COMMENTARY:    

Economic Policies Ahead

SKYE MASTERS, HEAD OF MARKETS RESEARCH, NATIONAL AUSTRALIA BANK, SYDNEY:

Future of JGB Yields

"The view is you're probably going to see Japanese stocks up, but a weaker yen and possibly higher JGB yields."

"It'll be interesting to see what that reaction is in JGB yields and whether you see that filter through to broader global bond markets on the fear of fiscal spending and what that means for sovereign issuance going forward."

JAMIE HALSE, MANAGING DIRECTOR, SENJIN CAPITAL, SYDNEY:

"Any stimulus measure is likely to positively impact any domestic-focused company and small to midcap stocks tend to be domestically focused."

"Cutting the consumption tax on food is a positive for domestic consumption spending (and) increased military spending is a positive for defence stocks. The real question is what other measures may be possible now with the huge mandate granted by gaining a two-thirds majority."

"The voters have clearly endorsed Sanaenomics, so it is possible further measures may be announced."

MAHJABEEN ZAMAN, HEAD OF FX STRATEGY, ANZ BANK, SYDNEY:

"The decisive win for PM Takaichi and the LDP really reinforces her push for bold spending and more assertive foreign policy. Now, of course, this victory will help advance Takaichi's pro-stimulus policies, allowing her to move forward without needing to negotiate with other parties on every issue."

"We do expect the yen to be weaker going forward on the back of this result. In terms of JGB yields, we expect them to also move higher, just reflecting higher inflation expectations and a little bit of that fiscal agenda that Takaichi will be pulling through."

KEISUKE TSURUTA, SENIOR BOND STRATEGIST, MITSUBISHI UFJ MORGAN STANLEY SECURITIES, TOKYO:

"In future fiscal operations, the ruling party will have less need to accommodate the relatively expansionary demands of opposition parties. That point can be taken as positive for the JGB market. On the other hand, Prime Minister Takaichi, having earned the public's confidence, is expected to accelerate policies such as 'responsible proactive fiscal policy'." 

"Whether a tax cut can be realized, and if so what stable revenue source would support it, remains fluid."

"In last week's JGB market, the ruling coalition's big win appeared to spur the view that a consumption tax cut would be shelved, which seemed to lead to a bull flattening. Precisely for that reason, today the renewed focus on the possibility of a consumption tax cut may test some scope for a reversal. At the very least, it is likely to act as a factor restraining last week's bull-flattening pressure."

(Reporting by Rocky Swift, Tom Westbrook, Satoshi Sugiyama; Editing by Edmund Klamann)