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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