Sanae Takaichi’s spending plans have sent Japan’s bonds and currency tumbling, raising the specter of an unruly capital flight reminiscent of the turmoil that nearly broke the U.K. bond market in 2022, according to Deutsche Bank’s global head of currency research.
Japanese government bonds are falling at the same time as the yen, reflecting concerns that the new prime minister’s stimulus plans, amid a dovish stance by the Bank of Japan, will worsen the country’s fiscal health.
That’s worrying George Saravelos, who compared the correlated market moves with the 2022 U.K. crisis. At the time, the pound slumped to a 37-year low and the gilts market nearly collapsed after then Prime Minister Liz Truss’s unfunded tax-cut plans spooked investors.
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