Following the LDP's landslide victory in the House of Representatives election, the Japanese market responded with higher stock prices, a stronger yen and higher bond prices, while purchases of Japanese assets by overseas investors intensified. As ultra-long-term JGB yields declined, attention turned to the BOJ's future pace of rate hikes and the administration's policy management.
The LDP's landslide victory in the House of Representatives election sent Japanese stocks sharply higher, while Japanese government bonds and the yen were also bought, producing a triple rise across stocks, the yen and bonds. Before the election, markets had also anticipated a so-called Takaichi trade of higher stocks, a weaker yen and lower bond prices, but in reality the market shifted to higher stocks, a stronger yen and higher bond prices. This suggests that overseas investors' view of the Japanese market may have changed.
In the bond market, ultra-long-term JGB yields fell sharply. The yield on 30-year JGBs declined from 3.55% immediately before the election to 3.44% on 13 February, sending bond prices higher. Overseas investors' share of trading has been increasing, and their demand is considered highly likely to have contributed to purchases of ultra-long-term JGBs after the election.
Investment in Japanese government bonds by overseas investors may have already been gathering pace before the election. According to the international securities investment statistics, overseas investors made net purchases of ¥2.0811 trillion in domestic bonds on 25 January, the largest net purchase since April 2025. Although they made net sales of ¥464.1 billion on 1 February, immediately before the election, gross purchases are believed to have remained high overall.
The view was expressed that it is important for the administration not to obstruct the BOJ's rate-hike decisions. In terms of fiscal policy, overseas investors are focusing on the stance of avoiding excessive economic stimulus under the National Conference (国民会議) and the Basic Policy on Economic and Fiscal Management and Reform. Markets are increasingly expecting the BOJ's rate-hike path to move into the upper end of the 1% range after its sixth Monetary Policy Meeting.