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The Nikkei 225 stock index is shown on a screen inside the Kabuto One building in Tokyo, Japan, Monday, February 9, 2026. Japanese stocks soared to record highs while bonds fell after Prime Minister Sanae Takaichi’s Liberal Democratic Party secured a landslide victory. Photographer: Kiyoshi Ota/Bloomberg via Getty Images
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The yen is trading near 160 against the dollar, Japanese stocks are at record highs and Japanese government bond yields are also likely to rise after Prime Minister Sanae Takaichi scored a landslide victory in Japan’s general election on Sunday.
The ruling Liberal Democratic Party, led by Gao Shi, won an absolute majority in the House of Representatives. 316 seats guaranteed The party’s biggest electoral victory since World War II.
The outcome gives her the power to override any legislative vetoes in the upper house, bolstering her ability to push her agenda through Japan’s legislative body.
“High School One Trade” Returns
Analysts said her victory would lead to a revival of the so-called “high trade,” which typically involves a weaker yen, rising stocks and higher yields on long-term Japanese government bonds. The trend reflects the market’s dovish stance on monetary policy and expectations of expanded fiscal stimulus.
There were some early signs Monday. benchmark Nikkei 225 Index soar past 57,000 marks hit a record high, while the broader Topix rose to a record high of 3,825.67 points, beating Citi analysts’ pre-election expectations.
“The LDP’s strong victory has warmed investors’ hearts,” said Frederic Neumann, chief Asia economist at HSBC. “Stock markets, in particular, are celebrating the surprising election results with a reload of ‘trade high’.”
“We hope that a clear majority will give the LDP more leeway to pursue pro-growth policies,” Neumann added.
Adrian Wong, global market strategist at J.P. Morgan Asset Management, agreed, saying the victory would lead to aggressive fiscal measures such as a two-year consumption tax cut to increase corporate investment and aggressive corporate reforms.
Debt worries linger
However, while most analysts agree on a boost for stocks, some warn that increased spending could weigh on bonds and raise bond yields. On Monday, the 10-year Japanese government bond yield rose 4 basis points to 2.27%.
before electionTakaichi announced a record 122 trillion yen budget for the fiscal year starting April 1, marking the second consecutive year of record spending.
Japan is the most indebted country in the world, with its debt-to-GDP ratio expected to be close to 230% by 2025, according to the Bank of Japan. International Monetary Fund.
Gao Shi told Japanese national broadcaster NHK After the election, she is seeking “a shift in economic and fiscal policy and ‘responsible, proactive fiscal policy.'”
“We will continue to move forward where we can and seek the cooperation of the opposition parties where we can gain their support,” she added, according to Google Translate.
Carlos Casanova, senior Asia economist at Swiss private bank UBP, expects the 10-year Treasury yield to reach 2.5%, with most of the pressure concentrated on the ultra-long end of the yield curve.
Others are more cautious. Sree Kochugovindan of Aberdeen Investments said the Liberal Democrats’ landslide victory did not give the city “the right to spend money as they please”.
“The LDP is fiscally conservative and the high market has been very concerned about bond investors,” the senior research economist noted.
Japan’s debt-to-gross domestic product ratio has fallen since the outbreak, and Takaichi’s latest fiscal and economic plans will keep it on a downward trend, he said.
Gao Yi said that the amount of newly issued government bonds is expected to be 29.6 trillion yen, which will be the second consecutive year that the issuance volume remains below 30 trillion yen.
The yen moves in the opposite direction
However, following the high market victory, the yen uncharacteristically rose 0.4% to 156.55 against the dollar.
Michael Wan, senior currency analyst at Mitsubishi UFJ Financial Group (MUFG), wrote in a note notes The move on Monday may reflect Koichi’s continued commitment to fiscal sustainability in his post-election remarks, as well as comments from Finance Minister Satsuki Katayama in coordination with U.S. authorities to support yen stability.
Katayama It is reported that After her victory as a freshman, she will communicate with financial markets on Monday if needed.
Earlier this year, the yen was close to the 160 mark against the dollar, and then strengthened sharply in late January on speculation that the New York Fed would conduct an “interest rate check” on the yen, which is often seen as a signal of possible intervention. Treasury Secretary Scott Bessant later denied The United States has intervened.
Katayama early Monday did not rule out taking action against “rapid moves inconsistent with fundamentals,” saying measures would include intervening in currency markets.
For analysts, 160 yen to the dollar appears to be the floor, with Citi analysts saying the yen is unlikely to depreciate significantly above that level given the possibility of foreign exchange intervention by Japanese or U.S. authorities.
“The yen will approach the 160 level again, but a battle between the market and the authorities is likely around the 159 mark,” Dutch bank ING said in a report on February 9.
