Daishin Securities said that as a super ruling bloc centered on the Liberal Democratic Party and Japan Innovation Party was formed by the House of Representatives election, the so-called "Takaichi trade"—rising stock prices and falling Government Bonds and yen—will likely continue.
In the House of Representatives election on the 8th, the ruling coalition of the Liberal Democratic Party and Japan Innovation Party secured 352 seats. Surpassing 310 seats—two-thirds of the House's 464 seats—means they can pass bills by revoting in the House of Representatives even if they are voted down in the House of Councilors, and they also meet the two-thirds threshold required to initiate a constitutional amendment in the House of Representatives.
The Liberal Democratic Party, which held 198 seats before the election, secured 316 seats this time. Exceeding the "absolute majority" threshold of 310 seats, beyond the "single-party majority" of 233 seats, puts the party in a position to hold a majority in all 17 standing committees in the House of Representatives and even monopolize the chairperson posts. It can pass a budget without opposition cooperation.
By contrast, the centrist reform alliance of the Constitutional Democratic Party and Komeito suffered a crushing defeat, winning 49 seats, sharply down from 167.
Daishin Securities projected that the impacts of the House of Representatives election pledges—constitutional revision (security) and a cut in the consumption tax on groceries (economy)—will come into view.
Moon Nam-jung, a Daishin Securities researcher, said, "Prime Minister Sanae Takaichi pledged in the House of Representatives election to swiftly revise three security documents to fundamentally strengthen security policy, revise the Imperial House Law and the Constitution, enact an anti-espionage law, establish a national intelligence agency, and set up a foreign investment committee for Japan." In particular, the plan is to explicitly stipulate the Self-Defense Forces in the Constitution to clarify their basis for existence.
Moon also said, "Measures to stabilize prices, such as a two-year cut in the consumption tax on groceries, subsidies for electricity and gas bills, and a reduction in gasoline prices, are also slated for execution," adding, "Concerns about a weakening of fiscal soundness due to expanded fiscal spending will linger as a label going forward."
The Takaichi Cabinet will tilt more conservative with policies such as fiscal expansion, stronger defense capabilities, and tougher policies on foreigners, and Japan will, in effect, become a country capable of waging war for the first time since the end of the Pacific War. However, as fiscal concerns grow, there is a possibility of increased instability in Government Bonds and the foreign exchange market, but Daishin Securities assessed that a recurrence would be difficult given that recent instability was driven more by speed than direction.
Moon explained that ▲ the tax revenue loss from the cut in the consumption tax on groceries amounts to only about 4% of the annual budget, ▲ the opposition's demands for household support measures will diminish due to the ruling coalition's landslide victory, and that with the Takaichi Cabinet's emphasis on growth investment, it will be difficult for rapid interest rate hikes and a weaker yen to occur as inflation concerns subside.
He added, "Through this House of Representatives election, the public's confidence in Prime Minister Takaichi was reaffirmed," and said, "The full-scale rollout of economic policies prioritizing growth and stronger policy execution will be a positive factor for the stock market."