Japan Macro Weekly

Mizuho analyzes the LDP's landslide election victory and its implications for Japan's fiscal policy and the BOJ's terminal rate, currently projected at 1.00%. While economic growth remains moderate, risks of fiscal loosening via consumption tax cuts dominate the JGB market outlook.

Key Takeaways

• 1.The LDP secured a landslide victory in the Lower House election, winning 316 seats and achieving a two-thirds majority with coalition partner Ishin.
• 2.The Bank of Japan (BOJ) is expected to reach a terminal rate of 1.00%, with the next hike likely in June or July 2026.
• 3.Prime Minister Takaichi is pushing for a two-year consumption tax exemption on food and beverages, potentially increasing fiscal risk for the JGB market.

Table of Contents

• Review of key indicators and events
• Economic indicators
• BOJ-related events
• Politics
• Economic outlook (as of 9 February)
• Comments on real GDP outlook
• Comments on CPI outlook
• Comments on domestic rates outlook

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