The ruling coalition’s defeat has implications for policy-making and budget deficits, causing a spike in long-term bond yields to record highs at 5%. The yen has depreciated significantly, influenced by expectations of tax increases and budgetary strains.
Investors are pivoting towards trade negotiations with the U.S. And potential tax cuts. The future of the coalition remains unclear. If Prime Minister Ishiba resigns, market instability may lead to increased foreign sell-offs in Japanese stocks and the yen.
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