Global repression

Yesterday, Japan’s ruling Liberal Democratic Party (LDP) held an internal leadership election following the resignation of Prime Minister Shigeru Ishiba. In a surprise outcome, Sanae Takaichi, a prominent ultra-conservative lawmaker known for her hawkish views on national security and dovish stance on fiscal policy, emerged victorious. The Nikkei 225 index jumped nearly 5%, closing at a record high above 48,000 points for the first time, Takaichi is perceived as less likely to push the Bank of Japan toward aggressive interest rate increases. Markets had been pricing in potential hikes to combat inflation, but her pro-stimulus views lowered those bets, easing pressure on borrowing costs and boosting equity valuations. Investors are also betting she may implement corporate tax reductions and increased government spending, Who’s going to pay the bill? Bonds and the Yen. As you can see below the 40 year JGB yield jumped with the news, and the yen sank to 155 against the dollar. Governments around the world will let inflation run hot to dilute their debts, particularly those highly indebted nations such as Japan or the U.S.

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