Market Euphoria Over Takaichi Ends as Yen, Japan Bonds Sink

Japanese Prime Minister Sanae Takaichi is facing her first major market test as jitters over the government’s impending stimulus package threaten to derail the rally her election helped ignite, Alice French, Mia Glass and John Cheng reported for Bloomberg News.

With Takaichi’s administration expected to unveil its long-awaited economic package, the “sell Japan” trade may only just be beginning.

Concerns that Takaichi’s spending plans will worsen Japan’s fiscal health have sent government bonds tumbling and exacerbated weakness in the yen, which has slipped further into the danger zone for potential intervention.

While stocks regained some ground on Thursday, the Nikkei 225 still headed for a weekly loss of more than 1%.

With Takaichi’s administration expected to unveil its long-awaited economic package, the “sell Japan” trade may be only just beginning.

The plan will incorporate ¥17.7 trillion of spending from the general account, topping the ¥13.9 trillion rolled out by Takaichi’s predecessor, according to documents seen by Bloomberg News.