The Flip Side Is Japan doubling down on Abenomics, or redefining it?
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Nov 6, 2025 Shinichiro Kadota, Head of Japan FX & Rates Strategy, discusses the future of Abenomics under Prime Minister Sanae Takaichi. They dive into Japan's fiscal ambitions amid a backdrop of rising JGB yields and a weakened yen. Kadota explains the challenges of demand for super-long government bonds and the implications of central bank independence on policy decisions. He also touches on potential fiscal constraints and the risks of market reactions. Additionally, they explore how global economic performance influences the yen and the potential for a snap election.
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Abenomics Recast Not Replayed
- Sanae Takaichi favors a more active, Abenomics-like fiscal stance but faces a different market and political environment than 2012.
- Shinichiro Kadota argues this will lead to a redefined, less extreme version of Abenomics rather than a full repeat.
Modest JGB Term Premium Impact
- Takaichi's fiscal plans are expansionary but constrained by political checks and market tolerance.
- Kadota estimates initial proposals add only ~5 basis points net to 30-year JGB term premium after offsets.
Fragile Buyers For Super-Long JGBs
- Demand for super-long JGBs has shifted as life insurers stopped buying and pension funds and foreigners fill the gap.
- Kadota warns these buyers are less stable, so issuance cuts matter to restore balance.