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2025-10-10 20:50:51
[Japan's ruling coalition collapses, markets closely monitor the risk of a reversal of the "high-market trade"] ⑴ On October 10, Japan's Komeito Party announced its withdrawal from the ruling coalition with the Liberal Democratic Party, ending their 26-year partnership. ⑵ This decision stemmed primarily from the two sides' failure to reach an agreement on addressing "black money politics," which suddenly put Sanae Takaichi's path to prime minister in jeopardy. ⑶ As a result, the market's previous bets on the "high-market trade" (i.e., expectations of fiscal expansion and monetary easing) reversed, causing the yen to rebound 0.5% from an eight-month low. ⑷ However, TD Securities believes that given the long-standing tradition of cooperation between the LDP and Komeito, the current political deadlock could be resolved through future negotiations. ⑸ If the LDP forms a new coalition with the Democratic Party for the People and others, its fiscal expansionary policies could intensify and shock the market.
