Japan PM's Aim With Snap Election Plan to Implement Reflation Strategy -- Market Talk

Dow Jones01-15

0629 GMT - Japanese Prime Minister Sanae Takaichi's plans to call a snap election is aimed at maintaining control over her party and its coalition so that she can implement her long-term reflation strategy, says Carmignac's Raphael Gallardo in a note. Markets rightly fear that greater political capital would mean a larger budget deficit and inflationary pressure, the chief economist says. "This has led to a sell-off in the bond market and a rise in stock prices," he says. "The yen reflects the fear that the Bank of Japan is being prevented by the government from normalizing real interest rates quickly enough to curb this inflationary pressure," Gallardo says. (emese.bartha@wsj.com)

(END) Dow Jones Newswires

January 15, 2026 01:29 ET (06:29 GMT)

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Markets rightly fear that greater political capital would mean a larger budget deficit and inflationary pressure, the chief economist says. \"This has led to a sell-off in the bond market and a rise in stock prices,\" he says. \"The yen reflects the fear that the Bank of Japan is being prevented by the government from normalizing real interest rates quickly enough to curb this inflationary pressure,\" Gallardo says. 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Markets rightly fear that greater political capital would mean a larger budget deficit and inflationary pressure, the chief economist says. \"This has led to a sell-off in the bond market and a rise in stock prices,\" he says. \"The yen reflects the fear that the Bank of Japan is being prevented by the government from normalizing real interest rates quickly enough to curb this inflationary pressure,\" Gallardo says. 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