After news of her victory emerged, the yen weakened above 150 against the dollar DXY+0.71% and Japanese government bonds TMBMKJP-10Y1.680% edged lower, although the Nikkei 225 NIY00+4.81% equity index surged almost 5% to a record high. ...

Volatility in Japan’s longer-dated government bonds is on the rise following Sanae Takaichi’s election win, and the moves are likely to spill over to markets as far away as the US and UK, according to Goldman Sachs Group Inc. The ascent of Takaichi risks pushing up long-end Japanese yields, strategists including Bill Zu wrote in a note. For every 10 basis point “idiosyncratic JGB shock,” investors can expect around two to three basis points of upward pressure on US, German and UK yields, the strategists ...

By Rocky Swift TOKYO (Reuters) -Japanese shares are expected to keep setting records even as the nation's currency and bonds sputter after fiscal dove Sanae Takaichi was elected on Saturday to lead the ruling party and likely become prime minister. Takaichi, 64, was considered to have the most expansionist fiscal and monetary agenda among five candidates in the Liberal Democratic Party race to replace hawkish Prime Minister Shigeru Ishiba. In the lead-up to the LDP race, a "Takaichi trade" emerged - lon ...

Core Viewpoint - Japan is facing an unprecedented rice crisis, with rice prices nearly doubling over the past year, leading to empty supermarket shelves and purchase limits, which is impacting the political landscape, monetary policy, and bond markets, potentially triggering a global financial market turmoil [1][10]. Group 1: Economic Impact - The price of rice has surged due to severe supply issues, with prices reaching over 4,200 yen for 5 kilograms, marking a 30-year high [3]. - Consumers are reducing their rice purchases, opting for alternatives like noodles, indicating that rice is becoming unaffordable even for the middle class [6]. - The crisis is exacerbated by Japan's long-standing agricultural policies that have distorted rice production, leading to a lack of resilience against extreme weather and structural demand changes [6][10]. Group 2: Political Consequences - The rice crisis is reshaping Japan's political landscape, with recent polls showing a significant drop in support for the ruling party, which may lead to a government crisis following the upcoming elections [7][8]. - The crisis has become a focal point for voters, with many expressing dissatisfaction with the government's handling of food security [7][8]. - If the ruling coalition loses its majority, it could lead to increased political instability and pressure on the current leadership [8][10]. Group 3: Monetary Policy Challenges - The Bank of Japan is facing a dilemma as rising rice prices contribute to public perceptions of inflation, despite overall CPI remaining low [9]. - The central bank's attempts to control inflation through interest rate hikes may not effectively address the root causes of the rice price surge, which are structural in nature [9]. - The conflicting need for fiscal and monetary policy to support the economy while managing inflation creates a challenging environment for Japan's financial stability [9][10]. Group 4: Global Implications - The rice price crisis in Japan could have far-reaching effects on global markets, particularly in the bond and currency markets, as Japan holds a significant amount of global sovereign debt [10][11]. - A potential sell-off in Japanese bonds could lead to increased yields globally, affecting financing costs and triggering a reevaluation of risk across markets [11]. - The situation may also impact trade relations, particularly with the U.S., as Japan faces pressure to open its rice market amid ongoing trade negotiations [11][12].

Core Viewpoint - CITIC Securities reports that Japanese government bond yields are likely to remain high in the short term due to the gradual exit from ultra-loose monetary policy by the Bank of Japan and the upward pressure from U.S. Treasury yields [1] Group 1 - The long-term Japanese government bond yields have reached historical highs, indicating a significant shift in the market [1] - The primary reason for this trend is the unsustainable nature of the previous ultra-loose monetary policy, leading to a reduction in bond purchases by the Bank of Japan [1] - The recent rise in U.S. Treasury yields has acted as a catalyst for the increase in Japanese bond yields [1] Group 2 - Short-term Japanese bond yields are expected to remain elevated, while the medium-term outlook will depend on the actions and stance of the Bank of Japan [1]