Japan’s incoming Prime Minister Sanae Takaichi has appointed former Finance Minister Shunichi Suzuki as the Secretary-General of her Liberal Democratic Party (LDP), who would essentially be her deputy in the party. She has also appointed former premier and party heavyweight Taro Aso as the party’s vice president.
Sanae Takaichi, who is expected to become Japan’s next prime minister, chose former premier and party heavyweight Taro Aso on Tuesday as vice president of her ruling party, a move some analysts saw as a restraining force against big fiscal spending.
Takaichi also chose former finance minister Shunichi Suzuki as secretary-general of the Liberal Democratic Party (LDP), a job that wields huge influence in party affairs, in a line-up of key party posts announced on Tuesday.
The announcements came after the ruling party’s pick of fiscal dove Takaichi as its head on Saturday, putting her on course to become Japan’s first female prime minister.
Japan’s share prices surged and the yen slumped this week on market expectations Takaichi will deploy big fiscal stimulus and pressure the central bank to go slow in raising interest rates.
“During the leadership race, the Aso faction backed Takaichi, so her administration may remain strongly influenced by him,” said Takahide Kiuchi, executive economist at Nomura Research Institute.
“Aso’s influence could moderate aggressive fiscal or overly dovish monetary impulses,” he said, adding Suzuki is also seen as emphasising fiscal discipline.
Aso was prime minister when the collapse of Lehman Brothers in 2008 jolted the global economy.
While he served as finance minister when former Prime Minister Shinzo Abe deployed his “Abenomics” stimulus policies in 2013, Aso has preached the need to keep heavily indebted Japan’s fiscal house in order. He is thus seen by markets as holding a more balanced approach on fiscal policy than proponents of aggressive spending like Takaichi.
But bond markets remained jittery on prospects Takaichi’s minority coalition could form an alliance with an opposition party, and nod to its calls for tax breaks and big spending.
The yield on the 20-year Japanese government bond (JGB) marked a fresh 26-year peak and the benchmark 10-year yield notched 17-year highs on Tuesday, on market views Takaichi’s policies may strain Japan’s already worsening finances.
Domestic media reported that Takaichi is in talks to possibly form an alliance with the Democratic Party for the People, which has proposed income tax reforms aimed at boosting take-home pay for working households.
“If Takaichi were to choose the Democratic Party, the size of spending could rise depending on what its leader will demand in exchange for forming an alliance,” said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
“There’s no guarantee Aso would serve as a counter-force against big spending,” she said. “Given so much uncertainty, there won’t be many investors willing to buy JGBs.”
(This is an agency story. Except for the headline, the story has not been edited by Firstpost staff.)
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