250319 Japan M -compressed

Japan election: a landslide mandate and a clearer runway for policy and markets

Equities
Charu Chanana 400x400
Charu Chanana

Chief Investment Strategist

Key points:

  • Clear mandate: NHK projects the LDP is on track for a single-party two-thirds majority, giving PM Takaichi strong policy room.

  • Fiscal impulse is likely: Our base case is that stimulus is coming — but markets will reward targeted, time-bound and funded measures.

  • Market map: Near-term support for equities on clarity; JGB curve may steepen first then potentially flatten; JPY stays sensitive to fiscal credibility and BOJ follow-through.


What happened

Japan’s snap election delivered a clear result. With results now clearer, NHK projects the ruling LDP is on track for a single-party two‑thirds majority in the 465-seat lower house — a scale of victory the party has not achieved before. The ruling coalition with the Japan Innovation Party was poised to secure more than 300 seats, enough to override upper house vetoes. Overall, the resounding election victory gives PM Takaichi a strong mandate and significantly more room to maneuver on policy.

Why markets care

A decisive result is typically supportive in the near term because it reduces political uncertainty — a “certainty premium.” Our base case is that fiscal stimulus is coming — that was largely the point of calling these elections in the first place: to secure a strong mandate to move faster on the domestic agenda.

Our view is, however, that the positives likely outweigh the negatives for markets. A supermajority expands policy room on tax relief, fiscal stimulus, defense and industrial policy, but it also increases the chance of policy coherence, flexibility and fewer surprises.

The main medium-term watch is whether stimulus is targeted, time-bound and funded (market-friendly) versus open-ended (which would raise concerns on funding, debt dynamics, and geopolitical risk).

Policy impact: power and optionality

With a strong mandate, the government can pass measures faster and with fewer compromises. That can be market-friendly if it leads to clearer, more coherent policymaking.

But a landslide also cuts both ways:

  • It can embolden bigger fiscal and security ambitions (raising questions on issuance, debt sustainability, and risk premia).

  • Or it can create room for pragmatism, as a secure leader has less need to campaign from the edges and more incentive to protect approval by moderating the most market-sensitive proposals.


What it means for markets

Equities: relief first, then rotation risk

A relief bid is plausible: political clarity and a strong mandate typically support risk sentiment.

Where stimulus could show up (based on Takaichi’s stated priorities): the government has consistently framed its agenda around “responsible and proactive” fiscal expansion with an emphasis on investment-led growth. In practice, that points to potential support for areas tied to defense, AI and digital infrastructure, semiconductors, and strategic supply chains/critical materials (including rare-earth-linked themes), alongside broader spending aimed at reinforcing economic and national security priorities.

The rally’s durability, however, depends on the bond market. If fiscal headlines quickly re-ignite JGB volatility — especially at the super-long end — equities may shift from a broad rally to a sector-rotation market.

In that rotation:

  • Policy-linked beneficiaries (defense, strategic capex, domestic investment themes) may hold up better.

  • Rate-sensitive and long-duration exposures may lag if yields back up.

Want to explore ideas across Japanese sectors? See our Japan stocks shortlist here: Japan stocks shortlist.

Bonds (JGBs): the long end is the pressure gauge

The election result can be bond-positive if it produces more coherent policymaking and fewer surprise concessions.

But the key risk is that a strong mandate becomes a green light for larger/unfunded fiscal expansion. If markets hear “bigger spending” without credible funding or sequencing, the super-long end (30–40Y) is typically where the stress shows up first.

Our view is that, at first glance, Takaichi’s policy mix argues for curve steepening: her emphasis on “responsible and proactive” fiscal expansion is likely to push up longer-dated yields, while a preference for a more dovish monetary backdrop could keep the short end more anchored. That logic may dominate immediately after the election, especially after a stronger-than-expected showing by the ruling party. Indeed, 30-year JGB yields are already rising early on Monday.

However, any initial steepening may not last. Even if borrowing needs rise with stimulus and tax relief, policymakers may be cautious about adding too much supply at the super‑long end. Those maturities have already seen large moves and remain volatile. That leaves the Ministry of Finance with an incentive to skew issuance toward shorter maturities — which would, over time, place more upward pressure on front‑end yields.

The yen adds another potential flattening impulse. Larger fiscal outlays and tax cuts can keep inflation pressure elevated and real rates low, which may exacerbate currency weakness. If yen depreciation feeds back into inflation and living‑cost pressures, the BOJ could end up hiking more than markets currently expect — lifting short‑term yields and flattening the curve.

Yen (JPY): trades the policy mix, not the politics

The yen response will be driven by the policy mix:

  • Yen-negative risk: if post-election messaging revives concerns about unfunded tax relief and larger issuance, the yen can stay heavy — and “160” chatter returns.

  • Stabiliser: if messaging pivots to pragmatism/fiscal discipline (targeted relief, clear funding, careful pacing), the yen can stabilise and volatility can fade — especially if positioning was already stretched going into the result.


Scenarios for the week ahead

Scenario A: Pragmatic supermajority (more market-friendly)

Targeted relief, clearer funding language, and careful pacing → JGB yields stabilise, yen volatility eases, and equities can extend gains.

Scenario B: Maximal mandate (higher volatility)

Large fiscal push with limited funding detail + bolder security agenda → long-end yields rise, yen weakens, and equities rotate rather than rally broadly.


Bottom line

This result removes the “who governs?” question. Markets now price the “how do they govern?” question — and that comes down to whether a supermajority becomes a mandate for disciplined delivery or bigger, faster fiscal ambition.


 

This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..

Outrageous Predictions 2026

01 /

  • A Fortune 500 company names an AI model as CEO

    Outrageous Predictions

    A Fortune 500 company names an AI model as CEO

    Charu Chanana

    Chief Investment Strategist

    Can AI be trusted to take over in the boardroom? With the right algorithms and balanced human oversi...
  • Dollar dominance challenged by Beijing’s golden yuan

    Outrageous Predictions

    Dollar dominance challenged by Beijing’s golden yuan

    Charu Chanana

    Chief Investment Strategist

    Beijing does an end-run around the US dollar, setting up a framework for settling trade in a neutral...
  • Dumb AI triggers trillion-dollar clean-up

    Outrageous Predictions

    Dumb AI triggers trillion-dollar clean-up

    Jacob Falkencrone

    Global Head of Investment Strategy

    Agentic AI systems are deployed across all sectors, and after a solid start, mistakes trigger a tril...
  • Quantum leap Q-Day arrives early, crashing crypto and destabilizing world finance

    Outrageous Predictions

    Quantum leap Q-Day arrives early, crashing crypto and destabilizing world finance

    Neil Wilson

    Investor Content Strategist

    A quantum computer cracks today’s digital security, bringing enough chaos with it that Bitcoin crash...
  • SpaceX announces an IPO, supercharging extraterrestrial markets

    Outrageous Predictions

    SpaceX announces an IPO, supercharging extraterrestrial markets

    John J. Hardy

    Global Head of Macro Strategy

    Financial markets go into orbit, to the moon and beyond as SpaceX expands rocket launches by orders-...
  • Taylor Swift-Kelce wedding spikes global growth

    Outrageous Predictions

    Taylor Swift-Kelce wedding spikes global growth

    John J. Hardy

    Global Head of Macro Strategy

    Next year’s most anticipated wedding inspires Gen Z to drop the doomscrolling and dial up the real w...
  • Executive Summary: Outrageous Predictions 2026

    Outrageous Predictions

    Executive Summary: Outrageous Predictions 2026

    Saxo Group

    Read Saxo's Outrageous Predictions for 2026, our latest batch of low probability, but high impact ev...
  • Despite concerns, U.S. 2026 mid-term elections proceed smoothly

    Outrageous Predictions

    Despite concerns, U.S. 2026 mid-term elections proceed smoothly

    John J. Hardy

    Global Head of Macro Strategy

    In spite of outstanding threats to the American democratic process, the US midterms come and go cord...
  • Obesity drugs for everyone – even for pets

    Outrageous Predictions

    Obesity drugs for everyone – even for pets

    Jacob Falkencrone

    Global Head of Investment Strategy

    The availability of GLP-1 drugs in pill form makes them ubiquitous, shrinking waistlines, even for p...
  • China unleashes CNY 50 trillion stimulus to reflate its economy

    Outrageous Predictions

    China unleashes CNY 50 trillion stimulus to reflate its economy

    Charu Chanana

    Chief Investment Strategist

    Having created history’s most epic debt bubble, China boldly bets that fiscal stimulus to the tune o...

This content is marketing material.

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice or a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Saxo partners with companies that provide compensation for promotional activities conducted on its platform. Some partners also pay retrocessions contingent on clients investing in products from those partners.

While Saxo receives compensation from these partnerships, all educational and research content remains focused on providing information to clients.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.