¡°Tokyo financial markets are preparing for the uncertainty of the domestic political pattern,¡± the Japan News news site ¡°the Japan News¡± on December 12, that the Japanese Communist Party announced its withdrawal from the ruling coalition with the People¡¯s Party, the Tokyo market shook last Friday, stock, debt, and exchange markets were affected. The report said that market tensions suggested that this volatile situation could continue until this week. Analysts said the end of the alliance made the market unavoidable, which also made the ¡°black swan¡± event possible, namely, in the opposition party to form a big coalition, the new People¡¯s Party chief of the city was not able to be Prime Minister. But looking further in the future, whoever elected as prime minister of Japan, needs to face continued

"High market trading" reversed

The Komeito Party announced its withdrawal from the ruling coalition, casting a shadow over Japan's political situation. Previously, investors bet that Sanae Takaichi would implement an expansionary fiscal policy after taking office, resulting in "high market trading" in the market. The Japanese stock market once surged, and the Nikkei 225 index rose sharply by more than 2,800 points. However, last Friday, the hot market suffered a reversal, and the market sentiment became tense. On that day, nearly 90% of the stocks in the main board market of Tokyo Stock Exchange fell, resulting in an all-round sell-off. The Nikkei 225 index once fell more than 600 points during the session and narrowed at the close, but it was still down 491.64 points from the previous trading day.

Japanese bonds and foreign exchange markets were also affected. The report said that due to the fall in prices, the new benchmark 10-year bond yield rose to 1.7%, up 0.01 percentage points from the previous day's closing, reaching the highest level in 17 years. This highlighted the investor's coldness toward it. Tokyo's foreign exchange market's yen exchange rate buyback momentum has also accelerated, causing the markets to generally question the feasibility of the expansionary fiscal policy advocated by the high market. The yen to the dollar exchange rate has once risen to 152.38 yen.

¡°The market had not previously anticipated that the Communist Party would terminate the alliance,¡± said Fukuoka asset management company strategist Fukuoka, ¡°it was an unexpected incident.¡±Mitsubishi Japan Union Morgan Stanley Securities Company analysts even mentioned the possibility of the ¡°Black Swan¡± event.If the opposition party formed a large coalition government, and the high market could not be elected prime minister, it would constitute the ¡°Black Swan¡± scenario.¡±

Amid political changes, the market outlines policy possibilities

While the likelihood of Ho Chi Minh being elected prime minister has been impacted, its policy tendency remains highly concerned by the market. In terms of economic policy, Ho Chi Minh tends to boost economic growth through more active fiscal expansion. According to the report in the Journal of Asia Review, during the leadership period, she said: ¡°I will start all the remaining growth switches in Japan to let the economic engine work at full speed.¡±

High-tech technology must be the cornerstone of Japan¡¯s economic recovery. Her advocated technological revitalization measures include the government¡¯s launched semiconductor industry revitalization program, as well as future technology research and development. The industry¡¯s goal to support High-tech is its consistently adhering to the easing monetary policy. High-tech securities analyst Ivy said in a report that High-tech is the heir to the ¡°Abbey Road¡±, advocating the promotion of the ¡°Abbey Economy 2.0¡± and the strengthening of the security policy line. In economic policy, High-tech Early Products will focus on ¡°Abbey three arrows¡± (a easing currency, positive fiscal, structural reform) as a policy focus, and is more active in the position of fiscal policy, and more pigeon in the position of monet

An analysis article by the Carnegie Peace Foundation pointed out that although the current economic proposal has not yet dealt with specific details, she had the opportunity to propose economic structural reforms similar to Abe's "third arrows". However, unlike Abe's overwhelming advantage of the Democratic Party when he came to power, even when he came to power, he must lead a weak Democratic Party with no majority in both houses.

Japanese economy with internal and external difficulties

In analyzing the challenges faced by the Japanese economy, the Carnegie Peace Foundation believes that the next Japanese prime minister has to deal with the growing dissatisfaction of voters with rising cost of living at the economic level. A post-election survey in July 2025 showed that the rising cost of living is most concerned about issues such as Japan¡¯s aging population, future medical expenses and retirement burden. In addition, the next prime minister has to deal with the challenges of U.S. tariffs and global trade restructuring.

In the midst of political turmoil, the Japanese economy is facing continued inflation, the U.S. government demands increased pressure on U.S. investment, expanding public debt, and continuing population aging. The ruling coalition¡¯s split has shaken the financial markets, the yen has fluctuated sharply, and investors are concerned about the outlook for Japan¡¯s economy, the next actions of the Japanese central bank and the frequent changes of the country¡¯s prime minister.

What worries the market even more is that Japan's most important partnership, the US-Japan alliance, has been under pressure again since Trump returned to the White House, which has aggravated the outside world's doubts about whether the Japanese government can control the increasingly turbulent global situation. According to Bloomberg News, the Japanese economy is expected to shrink in the third quarter of this year due to the impact of Trump's tariff policy. According to reports, Trump is expected to visit Japan in late October. Analysts said that if the Japanese leadership shows any signs of weakness, it may weaken its position in the US-Japan trade negotiations.