Japan: A Bet To Retake The House

The Japanese government is making a bet to regain their majority in the lower house. The LDP lawmakers have announced their intention to dissolve the lower house and call for a snap election on February 8. They are riding the waves from rising ratings of approval towards Takaichi and her stimulative policy, to regain their seats in the house. Currently, the LDP holds 199 seats and their new coalition partner, Ishin, holds 34 seats. Together, the coalition reached the majority of 233 seats in the lower house. Early surveys are suggesting there is a good chance the LDP could retake the majority. 

The political move for the LDP to regain majority has been packaged to give voters a chance to review the new coalition between LDP and Ishin, a right wing party compared to the leftist Komeito. The opposition parties have denounced such move will create a political vacuum and affect legislation work. The two biggest opposition parties, CDP and Komeito, have been in talks to create a new party (Centrist Reform Alliance) to fight against the ruling coalition. They combined for 172 seats, 61 seats short to fight for the majority. The number is not with them even if they are being joined by DPFP's 34 seats. 

The government is further riding the wave by putting the cut of consumption tax (food purchase) on the table. Such move will definitely be welcome by voters and could receive rapport from a few smaller parties. While such stimulative policy will give them a short term boost, market participants seems to be voting with their wallet as JGB yields jumped higher. Both the 2 & 10 yr yields are at historical high, suggesting market confidence for the Japanese fiscal picture is deteriorating after witness more stimulus based on borrowing.