Overview

• Sanae Takaichi was elected leader of the ruling Liberal Democratic Party on Saturday, positioning her to become Japan’s next prime minister.
• Japan’s Nikkei closed at a record 45,769.50 on Friday and strategists see scope for further gains as traders unwind short positions.
• Investors expect pressure on longer-dated Japanese government bonds and potential yen weakness, with a possible steepening of the yield curve.
• Takaichi called for the government and the Bank of Japan to work closely to achieve demand-driven inflation and said the current policy accord warrants careful consideration.
• Her agenda highlights subsidies for local governments, support for small and mid-sized firms, and not ruling out a cut to the consumption tax, while analysts warn her mandate could complicate BOJ rate hikes.