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LDP victory may reignite market unease over the fiscal consequences of her expansionary agenda - February 2, 2026
Japan’s ruling Liberal Democratic Party is forecast to secure a sweeping win in next week’s lower house election, a result that would entrench Prime Minister Sanae Takaichi’s leadership
JAPAN’S ruling Liberal Democratic Party is on track for a landslide victory in next week’s lower house election, according to a survey by the Asahi newspaper, a result that would significantly reinforce Prime Minister Sanae Takaichi’s authority and her push for aggressive fiscal stimulus.
A decisive outcome in Sunday’s vote would tighten Takaichi’s grip on her party and hand her a clear mandate to pursue expansionary economic policies, even as concerns mount over the implications for Japan’s public finances and the potential for rising government bond yields.
The Asahi poll, released on Sunday, projects that the LDP will comfortably exceed the majority threshold of 233 seats in the 465-member lower house, marking a sharp increase from the 198 seats it currently holds.
Together with its coalition partner, the Japan Innovation Party, also known as Ishin, the ruling alliance is expected to secure around 300 seats, consolidating its dominance in the lower chamber.
Market participants are closely watching the election outcome, viewing it as a referendum on Takaichi’s economic direction.
“A huge LDP win would further strengthen Takaichi’s grip on power. It won’t be surprising for markets to see a higher chance of Takaichi pursuing her flagship proactive fiscal policies including a consumption tax cut,” said Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
The Asahi survey also suggests mounting difficulties for the largest opposition force, the Centrist Reform Alliance, which could lose as many as half of its current 167 seats.
Takaichi’s ruling coalition currently holds only a slim majority in the powerful lower house and remains in the minority in the upper house, making the election a pivotal test of her leadership.
The prime minister dissolved parliament last month and called a snap election for February 8, seeking public backing for her efforts to revive the economy through fiscal expansion.
Investor sensitivity to her agenda was underscored last month when Japanese markets suffered a broad sell-off after Takaichi pledged to suspend an 8 per cent levy on food sales for two years, reviving concerns over fiscal discipline in a country where public debt exceeds twice the size of the economy.
Most opposition parties have also called for suspending or cutting the consumption tax, arguing that such measures are necessary to shield households from the rising cost of living. - February 2, 2026