By Leika Kihara
TOKYO, Feb 2 (Reuters) – Japanese Prime Minister Sanae Takaichi’s party is likely to score a landslide victory in next week’s lower house election, a survey by the Asahi newspaper showed, heightening the chance the country will continue to pursue big spending and tax cuts.
A strong showing in Sunday’s election would solidify Takaichi’s grip on her party and give her a mandate for her expansionary fiscal policy, which could heighten concerns about Japan’s finances and push bond yields higher.
Takaichi’s Liberal Democratic Party is likely to well exceed a majority of 233 seats out of 465 seats up for grabs in the lower house, according to Asahi’s poll released on Sunday. That would be an increase from 198 seats now.
Together with LDP’s coalition partner, the Japan Innovation Party or Ishin, the ruling alliance will likely reach 300 seats, the poll showed.
“A huge LDP win would further strengthen Takaichi’s grip on power. It won’t be surprising for markets to see a higher chance of Takaichi pursuing her flagship proactive fiscal policies including a consumption tax cut,” said Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
Japanese government bond yields rose on Monday as investors priced in the chance Takaichi will secure an electoral mandate to push through her “proactive” fiscal policy focused on bigger spending and tax cuts.
The largest opposition party, the Centrist Reform Alliance, is struggling and could lose half its 167 seats, the Asahi said.
Takaichi’s ruling coalition currently holds a slim majority in the powerful lower house but has a minority in the upper house.
The premier dissolved parliament last month and called a snap election on February 8 seeking a mandate for her push to reflate the economy with expansionary fiscal policy.
Japan suffered a broad market rout last month after Takaichi pledged to suspend an 8% levy on food sales for two years, reviving investor concerns about fiscal discipline in a country with public debt more than twice the size of its economy.
Most other parties have also called for a suspension or a cut to the consumption tax to cushion the blow to households from rising living costs.
(Reporting by Leika Kihara; Editing by Cynthia Osterman, Sonali Paul and Stephen Coates)
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