The 51st general election of the Japanese House of Representatives is scheduled for voting on February 8th, with the latest polls showing that Prime Minister Sanae Takai and her Liberal Democratic Party are expected to win by a landslide. Market expectations for Takai to be granted the popular mandate to push for tax cuts and expansionary fiscal policies have led to an increase in Japan’s government bond yields on Monday, February 2nd.
Currently, the ruling coalition does not hold a majority in the House of Councillors. A significant victory in the upcoming election next Sunday could consolidate the stability of Takai’s administration.
According to a survey conducted by the Asahi Shimbun from January 31st to February 1st among 370,000 people, the Liberal Democratic Party is projected to significantly increase its current 198 seats and surpass the threshold of 233 seats for an outright majority.
When combined with its ally, the Nippon Ishin no Kai party, the total seats of the ruling coalition are expected to exceed 300. In contrast, the new political party “Nakamichi Kaikaku Rengo” formed by the Constitutional Democratic Party and former LDP coalition partner Komeito is struggling in the polls, with its seats potentially halving from the original 167.
A poll released by Kyodo News on Sunday also reflects a similar trend, with the LDP’s support rate in the proportional representation (party vote) rising to 36.1%, an increase of 6.9 percentage points from the previous week.
In single-seat district polls, 44.0% of voters lean towards supporting the ruling party candidates, significantly ahead of the opposition camp at 26.5%. Additionally, the approval rating of the Takai cabinet is currently holding at a high level of 63.6%.
Meanwhile, a significant 71.0% of voters express a lack of confidence in the “Nakamichi Kaikaku Rengo,” indicating that the opposition camp’s integration has not gained mainstream public approval.
In this election, 53.6% of voters consider “cost of living issues” as the most important topic. To address inflation, Sanae Takai has promised to freeze the 8% consumption tax on food for two years and continue to promote expansionary fiscal spending.
While these policies enjoy support from many voters, concerns among investors about Japan’s fiscal discipline have directly impacted fluctuations in government bond yields. Currently, Japan’s public debt exceeds twice the size of its total economy, making it the highest among advanced economies.
Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, told Reuters: “If the LDP wins big, it will further strengthen Takai’s power base. The market sees an increased possibility of Takai pushing for her flagship aggressive fiscal policies, including a consumption tax cut, which is not surprising.”
According to the Kyodo News survey, in the proportional representation (party vote), the populist-leaning “Sanseito” party has a support rate of 5.6%, slightly ahead of Nippon Ishin no Kai’s 5.4%; the newly formed “Mirai Team” ranks sixth with 4.4%.
Despite the significant lead of the ruling coalition, the Kyodo News survey shows that 27.2% of voters have yet to decide on the target of their single-seat district vote, and 21.3% of voters have not determined their party vote target. This undecided group of around one-fourth will become a key focus for all parties in the final week of the election campaign.