President Donald Trump has offered a “complete and total endorsement” of Prime Minister Sanae Takaichi ahead of Japan’s general election on Sunday, a move that experts say could trigger a massive realignment of global currency and bond markets.
Currency Pressure And The ¥160 ‘Red Line’
The prospect of “Sanaenomics”—a revival of the late Shinzo Abe‘s reflationary policies—has exerted significant downward pressure on the yen. According to ING, “USD/JPY strength will likely demand sustained intervention,” with the pair potentially testing the ¥160 to ¥162 range following an LDP victory.
As of the publication of this article, the USD/JPY exchange rate stood at ¥156.85 for $1.
“A positive election result for the LDP that would pump more air into the ‘Takaichi trade’ is a USD/JPY positive,” ING analysts noted, adding that officials in Tokyo are likely to do battle at the ¥160 level to curb the rising cost of living.
Redefining The Carry Trade, Global Yields
The shift toward a “normal economy” is already resetting global benchmarks. Reuters highlights that yields on 30-year Japanese Government Bonds (JGBs) surged to a record 3.88% in late January, a “stomach-churning” move that has reverberated from the U.S. to Germany.
As the Bank of Japan moves toward monetary normalization, the “negative carry play” is being redefined. ING expects JGB yields to hit 3.0% by the end of 2027, driven by sustainable inflation and wage growth.
This domestic “return to normal” threatens to trigger a repatriation of Japanese capital, potentially pushing U.S. Treasury yields higher as the world’s largest creditor nation brings its liquidity back home.
While the 10-year and 30-year U.S. Treasury yielded 4.19% and 4.85%, the 10-year and 30-year JGB yielded 2.23% and 3.55%, respectively, as of the publication of this article.
Trump Endorsement And Election Mandate
Breaking with diplomatic tradition, Trump praised Takaichi on social media as a “strong, powerful, and wise Leader,” confirming a high-profile summit in Washington scheduled for March 19.
According to The Japan Times, the endorsement comes as Takaichi’s Liberal Democratic Party (LDP) and the Japan Innovation Party are on track for a landslide victory, potentially securing nearly 300 seats in the 465-seat Lower House.
While Takaichi’s pro-stimulus agenda initially rattled markets, Reuters reports that a decisive win may actually be the “best scenario” for stability. An overwhelming majority would allow Takaichi to ignore more radical tax-cut demands from opposition parties, who are calling for even deeper fiscal expansion.
“I would like to realize a new golden age of the Japan-U.S. alliance, where both Japan and the United States will become stronger and also more prosperous,” said Takaichi, addressing the media and President Trump at the start of their bilateral meeting on Oct. 28, 2025, at the Akasaka Palace.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo Courtesy: Evan El-Amin on Shutterstock.com
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