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Japan’s first female prime minister takes power, Abenomics’ successor has hidden dangers, and the Japanese yen’s life hangs on three major variables
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: Japan's first female prime minister takes power, the successor to Abenomics has hidden dangers, and the Japanese yen's life hangs on three major variables." Hope this helps you! The original content is as follows:
In the nomination election for Prime Minister of the House of Representatives, Takaichi Sanae received 237 votes, more than half (233 votes). In the first round of voting in the Senate, Takaichi Sanae received 123 votes, less than half (124 votes), so he entered the second round of runoffs, and received 125 votes in the runoff, more than half. As a result, Sanae Takaichi was elected as the 104th Prime Minister of Japan after being nominated by the Prime Minister of the House of Representatives and the Senate, and was also the first female Prime Minister in Japan's constitutional history.
At the cabinet meeting on the morning of the 21st, the Ishiba cabinet announced the resignation of the general manager. His length of service is 386 days.
During the election campaign, Takaichi Sanae publicly stated: "We will actively provide fiscal support through bold public investment and create a loose financial environment."
His position is that in order to boost the economy, he also endorses the issuance of deficit government bonds. Analysts believe that this is in line with the policies adopted by “Abenomics” in the past. "Abenomics" is the economic policy implemented by former Prime Minister Shinzo Abe since December 2012 in order to get rid of deflation. Its core is the so-called "three arrows", namely bold financial and monetary policies, expansionary fiscal policies and economic growth through structural reforms.
The Japanese stock market rose in response, and the yen accelerated its depreciation
There are two core logics for the rise in market stock prices: First, after reaching a consensus on the formation of a coalition government with the Japan Reform Association, the uncertainty at the political level has been significantly reduced; second, the market's expectations for the high market's signature policy-"fiscal expansion" have increased, which has implicitly priced in the return of the "Abenomics" model. The decline in the exchange rate xmaccount.comes from the fact that the expansionary policies of the new prime minister may lead to rising inflation and the inability to narrow the actual interest rate differential between the United States and Japan.
The past and present life of Takashima Economics
Takashima sees himself as a "breaker" for the country's economy. He succeeded former Prime Minister Abe, who was previously considered a "drag on the economy." His policy stance is clearly biased towards the "radical fiscal camp" - he does not hesitate to expand the issuance of deficit government bonds to increase fiscal stimulus.
On the one hand, she stated that she would introduce anti-inflation measures such as gasoline tax cuts, but on the other hand, she expressed contradictory views, saying that "it is too early to declare the end of deflation at this stage." At the same time, she clearly opposed the Bank of Japan's (BoJ) interest rate increase plan to hold a monetary policy meeting at the end of this month, advocating that "the government must bear the ultimate responsibility for both fiscal policy and monetary policy," xmaccount.completely ignoring the principle of independence of the central bank.
As of the end of 2024, Japan’s national debt has reached approximately 1,317 trillion yen, exceeding twice the size of nominal GDP. Affected by expectations that Gao will take over as prime minister, market concerns about fiscal deterioration have sharply increased.
Similarly, Prime Minister Gao Shi also advocates a proactive fiscal policy. Especially in response to rising prices, the issuance of deficit government bonds has been included in financial resource considerations. Deficit treasury bonds refer to bonds issued to fill the fiscal deficit caused by government fiscal expenditure exceeding fiscal revenue.
Prime Minister Gao Shi also held a negative attitude towards raising interest rates. During last year's presidential election, he even told the Bank of Japan, "I think it would be foolish to raise interest rates now." At the press conference on the 4th, he emphasized that "the government must be responsible for both fiscal policy and financial (monetary) policy." The outside world believed that this was an indirect criticism of the Bank of Japan's increase in the benchmark interest rate.
In 2012, Prime Minister Takaichi also mentioned the power to remove the president of the Bank of Japan. At that time, former Prime Minister Abe mentioned this power in order to put pressure on the Bank of Japan to implement large-scale quantitative easing; and Prime Minister Takaichi, who was the policy director of the Liberal Democratic Party at the time, promoted it as a key discussion matter.
External differences between high-market economics and the Aben era
High-market economics is regarded as a replica of Abenomics, but in fact it is a policy framework that is similar in appearance but different in spirit. It should be more accurately positioned as new Abenomics.
The core difference is: the current inflation that has lasted for more than three years has seriously weakened people's purchasing power, and (Gao Shi's radical policies) may even become the final blow to people's livelihood.
Looking back before the second Abe administration came to power, the US dollar against the yen once fell to around 76 yen. At that time, xmaccount.companies generally called for the devaluation of the yen, the media focused on the issue of yen appreciation-induced deflation, and public opinion also recognized the yen exchange rate correction, but the reasonable range of market expectations was only about 120 yen per US dollar.
As of now, Japan's nominal GDP has shrunk from 6.2 trillion US dollars to 4 trillion US dollars - the dividends of currency depreciation only flow to the market, xmaccount.companies and the wealthy classes holding financial assets, while ordinary people are fully exposed to the dual pressure of yen depreciation + inflation. ”
According to statistics from the Imperial Data Bank, there were 488 cases of corporate bankruptcy due to inflationary pressure in the first half of 2025, setting a new record for the opening statistics in 2018.The highest record since the beginning of time.
The market is worried about this series of policies that are reminiscent of "Abenomics 2.0". First of all, unlike the deflationary environment under former Prime Minister Abe, Japan is currently experiencing a moderate price increase of 2% per year.
According to estimates by the Japanese Cabinet Office, the supply and demand gap, which reflects the gap between supply and demand in the Japanese economy, recorded 0.3% in the second quarter, turning positive for the first time in eight quarters. If demand is increased through active fiscal policies and other means, the gap between supply and demand is likely to further widen, thus accelerating price increases.
In addition, if the benchmark interest rate continues to maintain its current level, the depreciation of the yen against the US dollar is expected to continue. This will lead to an increase in import prices, including energy, which is likely to stimulate price increases again.
Response of the Takaichi team
However, thankfully, the financial minister to be appointed by Prime Minister Takaichi, former local district creation photo Yamasaki, has previously stated his support for the Bank of Japan to raise the benchmark interest rate. According to the "Nikkei Shimbun" report, Finance Minister Katayama, who came from the bureaucracy of the Ministry of Finance (now the Ministry of Finance), while supporting interest rate increases, also constantly put forward the view that it is necessary to promote the appreciation of the yen.
In addition, Taro Aso, vice president of the Liberal Democratic Party, who played a "kingmaker" role in Takaichi's election as prime minister, once served as finance minister and is a balanced fiscal theorist. Therefore, he is expected to curb over-expansionary fiscal policy to a certain extent. Yu Uchiyama, a professor at the University of Tokyo, said: "The core of President Takaichi's economic xmaccount.commitment is economic growth." "The goal is to restore the past glory favored by conservatives and make active growth-oriented investments to strengthen xmaccount.comprehensive national strength."
Yen Outlook:
Traders in the future need to pay attention to the core of Japan's economy and inflation, which lies in the policy game and risk balance: high municipal power to promote radical fiscal expansion (relying on deficit government bonds), whether it can be coordinated with the demands of hawks within the Bank of Japan (such as Takada Sou, etc.) to insist on raising interest rates to control inflation.
At the same time, the question of who xmaccount.comes first, inflation or wage growth in Japan, and whether imported inflation will worsen, mainly focuses on changes in CPI, unemployment rate, and wages.
We need to be wary of debt risks in the long term - government debt accounts for more than 230% of GDP, and debt repayment in fiscal year 2026 accounts for a quarter of the budget. Expansionary fiscal policy may push up financing costs, trigger market turmoil and suppress the trend of the yen.
In addition, financial photo Yamasaki's stance on raising interest rates and Taro Aso's balanced fiscal proposition, whether they can be integrated into the high market's radical tendencies, and the impact of the Federal Reserve's policy on the U.S.-Japan interest rate differential and the yen exchange rate will become key variables that influence the direction of the economy.
The above content is all about "[XM Foreign Exchange Platform]: Japan's first female prime minister takes power, the successor to Abenomics has hidden dangers, and the Japanese yen's life hangs on three major variables". It is carefully xmaccount.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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