Market analysts warn of Yen and bond volatility
Prime Minister Shigeru Ishiba announced his resignation at age 68, instructing the Liberal Democratic Party (LDP) to hold an emergency leadership race. He will continue his duties until a successor is elected. The resignation comes at a sensitive time for the world’s fourth-largest economy. (Source: Reuters)
Analysts warn that Ishiba’s exit could spark volatility in JGBs and the yen. Political uncertainty, fiscal policy risks, and leadership changes are expected to influence domestic and global markets.
Marchel Alexandrovich, Saltmarsh Economics: Fiscal policy uncertainty combined with high government debt can weigh heavily on bond yields, similar to challenges seen in Europe.
Katsutoshi Inadome, Sumitomo Mitsui Trust: Super-long bond yields may rise, as Ishiba had enforced strict fiscal discipline.
Michael Brown, Pepperstone: The resignation adds downside risk for the yen and long-end JGBs, with markets pricing in political uncertainty and potential leadership contests. Looser fiscal policies from new candidates could further pressure bonds.
Saktiandi Supaat, Maybank: Initial safe-haven yen buying may occur, but sustained direction depends more on Fed–BoJ policy divergence than domestic politics. Broader LDP instability could amplify safe-haven flows.
Uncertainty is likely to delay any Bank of Japan tightening cycle. Brown notes policymakers were already cautious on hikes, while Rong Ren Goh highlights that focus will shift to the September and October policy meetings for JGB and yen guidance.
Takamasa Ikeda, GCI Asset Management: Markets have largely priced in Ishiba’s resignation, with attention turning to his successor. If Sanae Takaichi wins, increased government spending could boost the stock market.
(Disclaimer: This slideshow has been sourced from Reuters)
