A Big Ruling Coalition Win Equals Lower Fiscal Risk

The LDP/JIP coalition's supermajority in the Japanese Lower House election reduces the likelihood of a fiscally damaging consumption tax cut on food. This outcome lowers overall fiscal risk and alleviates pressure on the yen and government bond yields.

Key Takeaways

• 1.The ruling LDP/JIP coalition secured a supermajority of 352 seats in the Lower House election, reducing the political necessity to compromise on fiscal populist measures.
• 2.The probability of a consumption tax cut on food has decreased because the landslide victory removes the need for cooperation with opposition parties advocating for such cuts.
• 3.Maintaining the current consumption tax is critical for fiscal stability; a cut to 0% would widen the annual funding shortfall from ¥4.4tn to ¥9.4tn.

Table of Contents

• On Our Minds
• Analyst certification
• Mandamar disclaimer
• Conflicts of interest
• Important Notice
• Other Material Conflicts
• Important Disclaimers

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