Coalition Agreement and First Female Prime Minister in Japan

Historic Coalition Agreement in Japan

Japan's ruling party Liberal Democratic Party (LDP) is taking a historic step by signing an important coalition agreement with the Japan Innovation Party (JIP) on Monday, October 23rd.

Leadership of Sanae Takaichi

This coalition will pave the way for Sanae Takaichi to become Japan's first female prime minister. According to Hirofumi Yoshimura, co-leader of Ishin, LDP and JIP have reached a general consensus and will announce the details of the agreement to the public at 18:00.

Parliament and Possible Election Outcomes

LDP and Ishin are represented in the lower house of parliament with a total of 231 seats, but they are two seats short of a majority. Divisions among opposition parties significantly increase Takaichi’s chances of winning the vote. Following Takaichi's moderate stance on fiscal consolidation, the yen has depreciated while stocks have gained value.

Economic Expectations and Central Bank Strategy

The depreciation of the yen poses a risk of increasing inflation, which is the biggest concern for voters. LDP and Ishin largely share common views on issues such as security, foreign policy, and energy. Both parties advocate for a strengthened security alliance with the U.S. and want Japan to have a strong military.

Vanguard Asset Management's Strategy

Meanwhile, Vanguard Asset Management Ltd. aims to profit if the central bank raises interest rates and flattens the bond yield curve, despite the political developments in Japan. Vanguard's head of international interest rates, Ales Koutny, is strengthening positions by selling short-term bonds and buying long-term bonds.