Japan Macro Policy Update

Mizuho analyzes the impact of Japan's February 2026 election, where the LDP secured a supermajority, likely accelerating defense spending increases over consumption tax cuts. The report highlights potential fiscal expansion and its impact on the JGB market and Nikkei 225.

Key Takeaways

• 1.The Liberal Democratic Party (LDP) won a historic standalone majority in the House of Representatives, securing 316 of 465 seats.
• 2.Defense spending is expected to accelerate toward 2% of GDP and potentially higher (up to 3.5%) following the election victory.
• 3.A proposed consumption tax cut on food and beverages faces significant resistance within the LDP and funding challenges, making it slower to implement than defense goals.

Table of Contents

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