日本选民和债市，高市早苗只能选一个！

Core Viewpoint - Japanese Prime Minister Sanna Takashi faces a critical dilemma between appealing to voters for the upcoming election on February 8 and tightening fiscal policy to stabilize the increasingly volatile bond market. This situation not only impacts Japan's economic outlook but could also trigger a ripple effect in global financial markets [1]. Group 1: Fiscal Policy and Election Strategy - To gain voter support, Takashi has promised to suspend the food consumption tax for two years, which is expected to cost approximately 5 trillion yen (about 32 billion USD). This move has raised concerns about fiscal discipline and has not fully reassured voters, instead angering bond investors [1][5]. - Analysts suggest that if Takashi wins decisively in the election, trust in her fiscal discipline may further erode, potentially leading to a sell-off in Japan's debt market, which is the third largest globally [5][8]. - The recent commitment to tax cuts is seen as a significant policy reversal, as Takashi previously opposed such measures. This shift is largely viewed as a political strategy in response to opposition party proposals [10]. Group 2: Bond Market Reactions - The Japanese 40-year government bond yield has surpassed the psychological threshold of 4%, marking a historic re-evaluation of Japan's bond market. The benchmark 10-year bond yield has also recently exceeded 2%, reaching its highest level in over 25 years [6][9]. - The surge in bond yields has raised alarms among global investors, with some large Japanese investors beginning to repatriate funds from overseas, negatively impacting long-term bond performance in other regions [6][8]. - The market's reaction indicates a growing concern over Japan's fiscal sustainability, particularly given its debt level of 250% of GDP under aggressive fiscal policies [8]. Group 3: Currency and Economic Implications - The ongoing rise in long-term yields is starting to have adverse effects on the economy and financial markets, potentially reversing previous trading strategies that favored a weak yen and rising stock markets [9]. - The yen's significant depreciation has reached a level that typically prompts government intervention, placing policymakers in a difficult position between intervening in the currency market or raising interest rates to support the yen, which could further increase yields [9][10]. - There is skepticism about whether raising interest rates to defend the currency is feasible, as it would directly raise financing costs and could undermine the economic growth that fiscal expansion aims to achieve [9].