The LDP achieved a historic landslide victory. Securing over two-thirds of the seats alone, the LDP can now pass bills previously vetoed by the House of Councillors. The Takaichi administration has gained free rein over policy, suggesting more aggressive fiscal spending and a more hawkish diplomatic stance at first glance.
However, the United States and the markets themselves could emerge as the biggest opposition. While the dollar-yen pair hesitated to extend gains due to intervention concerns, we must brace for a risk-on, yen-weakening trend in the medium to long term driven by Takaichi’s continued aggressive fiscal policy. The dollar-yen is adjusting today, but it’s fundamentally a buying opportunity on dips.

This week (February 9-13) is an unprecedented “abnormal week” with schedules drastically altered due to the U.S. government shutdown. The biggest caution point is Wednesday, the 11th. The U.S. Nonfarm Payrolls (NFP) report, originally scheduled for last week, has been postponed to this day. Japan is closed for National Foundation Day on this date.

With liquidity in Asian trading hours extremely low, the release of the employment report coinciding with the entry of European and New York traders carries an extremely high risk of flash crash-level volatility. Furthermore, the US Consumer Price Index (CPI) is also scheduled for release on Friday, leaving no time to catch one’s breath.