Weaker Dollar and Huge Election Victory for Japanese PM Takaichi’s LDP Party
February 9, 2026
(153) In lower house Japanese parliamentary elections yesterday, the ruling Liberal Democratic Party won 316 of 465 contested seats, up from 198 in the previous election and exceeding their prior record high of 300 in the 1986 election. Yesterday’s landslide win also surpasses the two-thirds threshold that will prevent the lower house from stopping any legislation, thus ensuring that Prime Minister Takaichi will be able to implement the substantial fiscal stimulus that she seeks. That developments points to higher interest rates along the maturity spectrum.
With an overnight rise of 0.7%, the yen was not the only currency to record a large advance against the dollar this Monday. The euro also rose 0.7% to above $1.1900, benefiting from ECB expressions last week of acceptance of the euro’s ongoing rise against the dollar. The dollar is 0.9% lower against the Swiss franc and has dropped 0.6% and 0.4% relative to the Australian and New Zealand dollars. A smaller 0.3% drop versus sterling reflects new political trouble for British Prime Minister Starmer and the ruling Labor Party following the weekend resignation of his chief of staff and other fallout from former British Ambassador Mandelson’s implication in the Jeffrey Epstein scandal.
A five-basis point rise today in the British 10-year Gilt yield and a marginal slid in the FTSE equity index contrast with stock market gains and stable performances today of other 10-year European sovereign debts. Italy’s stock market shows a rise exceeding 1.0%, and the German DAX and Spanish IBEX are 0.5% firmer.
Asian stock markets played catch-up after Friday’s powerful equity advance, with advances today of 3.9% in Japan’s Nikkei, 4.1% in the South Korean Kospi index, and rises of more than 1.0% in China, Hong Kong, Taiwan, Indonesia and Australia.
Other out-sized financial market moves today include a six-basis point rise in the 10-year Japanese JGB yield, a 1.7% decline so far in the price of Bitcoin and increases of 3.8% in silver and 1.2% in the case of gold.
Japanese data releases today highlight
- A smaller-than-forecast JPY 729 billion current account surplus in December versus JPY 1.07 trillion in December 2024. In seasonally adjusted terms, the surplus of JPY 2.697 trillion was 14% narrower than November’s surplus. That didn’t prevent the 2025 calendar year surplus of JPY 31.88 trillion from exceeding the previous year’s JPY 28.69 trillion and again surpassing 4.0% of GDP.
- Bank lending in January posted a larger 4.5% year-on-year increase versus 4.2% in the fourth quarter.
- The economy watchers index that measures sentiment among Japanese service sector workers weakened unexpectedly to a 4-month low in January but remained above last year’s low point in April.
- Nominal cash earnings rose 2.4% year-on-year. Translated into inflation adjusted terms, there was a dip of 0.1%. Bank of Japan officials are hoping to see stronger wage growth than these results show.
Chinese foreign exchange reserves jumped by $41.3 billion last month to $3.4 trillion, their highest level in 122 months.
Mexican consumer price inflation rose 0.1 percentage point last month to a 2-month high of 3.8%, still not far from the 55-month low of 3.5% last July and well below the cyclical high of 8.7% in August-September of 2022.
Norwegian overall GDP growth slowed to 1.1% in 2025 from 1.4% in 2024, reflecting a slight contraction from the off-shore oil sector. Mainland GDP that excludes that drag grew 1.8%, three times the 0.6% pace in 2024. Meanwhile, Norwegian PPI deflation of -7.8% in January was its least deflationary in three months.
Slovenian CPI inflation edged 0.1 percentage point lower in January to a 2-month low of 2.6% and well off the 11.0% peak in July-August of 2022.
Consumer confidence in Switzerland became marginally less pessimistic in January, posting its least negative reading in a year. The readings have been below zero since Russia invaded Ukraine early in 2022.
Indonesian consumer sentiment climbed to a 12-month high in January.
Euroland’s Sentix barometer of investor sentiment improved to a 7-month high of 4.2 in February from -1.8 in February and -9.2 last October.
Mongolian consumer price inflation last month matched December’s 14-month low of 7.5% but above the mid-2024 low of 6.1%.
In contrast to the big advance just before the weekend, U.S. equities gave up some marginal ground in their first half hour of trading.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Japanese current account, Japanese election results, political unrest in the U.K.
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