Japan, Upper House
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Internal rivals and a resurgent nationalist right are jeopardising Prime Minister Shigeru Ishiba’s already precarious position.
Ishiba's ruling Liberal Democratic Party and its junior coalition partner Komeito were short three seats to maintain a majority in the 248-seat upper house in Sunday's vote.
JGB yield rose to the highest since October 2008 at 1.595% last Tuesday after opinion polls increasingly pointed to opposition gains. The 30-year yield shot to an all-time peak of 3.2%, and the 20-year yield leapt to the highest since November 1999 at 2.
Moody's has rated Japan A1, the fifth-highest level, with a "stable" outlook since December 2014. But it warned in a report in May that it may downgrade the rating "if prospects increase of a material and sustained widening in fiscal deficits leading to a significant deterioration" in Japan's already high debt burden.
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Japanese Premier Shigeru Ishiba on Monday revealed plans to stay in office to provide “stability” and tackle economic concerns after his ruling coalition saw striking losses in the country’s upper house elections.
Japan's election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes.