The formation of Japan's new coalition government signals fiscal stability, potentially paving the way for a Bank of Japan rate hike on October 30.
OCBC strategist Christopher Wong forecasts that the formation of a coalition government between Japan’s Liberal Democratic Party and Innovation Party will reduce political uncertainty and stabilize the market. This shift may lead to a Bank of Japan rate hike on October 30, 2025, as fiscal stability becomes more apparent. Despite Sanae Takaichi’s earlier pro-stimulus stance, coalition constraints could necessitate policy adjustments.