Yen Strengthens After Japan Election

The yen strengthened after Japan’s Feb. 8, 2026 election as the Liberal Democratic Party (LDP) under Prime Minister Sanae Takaichi secured a postwar-record parliamentary mandate. The victory raised prospects for expanded fiscal and security spending alongside a potential pause on the food consumption tax.

Record LDP Supermajority

The LDP won 316 seats in the 465-seat Lower House, up from 198 before the vote, achieving an outright two-thirds supermajority. With the Japan Innovation Party (JIP) holding 36 seats, the governing coalition reached 352 seats in total. This marks the largest single-party Lower House victory in postwar Japan, surpassing the LDP’s 304 seats in 1986 and the Democratic Party of Japan’s 308 seats in 2009.

The opposition suffered significant losses. The centrist Reform Alliance fell from 172 to 49 seats, the Democratic Party for the People edged up to 28 from 26, and the Japanese Communist Party dropped to 4 from 8. These shifts reduce opposition influence in the lower chamber and alter parliamentary debate dynamics.

Policy Agenda and Market Response

The supermajority gives Prime Minister Takaichi room to pursue a “responsible but aggressive” fiscal program, including increased defense and security spending. The administration plans to convene a suprapartisan national council to consider suspending the 8% consumption tax on food for two years. These priorities form the core of the government’s near-term economic agenda, signaling a tilt toward fiscal measures aimed at boosting domestic demand.

The coalition’s dominance enables it to override rejections in the upper chamber and advance constitutional amendment proposals. This reshapes the legislative landscape, shortening the path for contentious measures and increasing the predictability of policy outcomes with fiscal and strategic implications.

Following the election, Takaichi held a victory event at party headquarters. The Diet is set to reconvene soon to confirm her as prime minister and announce a cabinet expected to see few changes. The swift return to parliamentary business will allow the new majority to prioritize its campaign platform.

Market reports noted immediate reactions, with the yen firming and Japanese equities rising. Investors appear to price in a higher likelihood of fiscal expansion, stepped-up defense spending, and a temporary cut to the food consumption tax. These developments raise the odds of policy decisions that will influence allocations across Japanese equities and fixed-income markets.

Investors and analysts will monitor how quickly the administration translates its legislative advantage into concrete bills and spending plans, and how these measures affect borrowing needs and domestic demand. For now, the combination of an unusually large parliamentary majority and a clear pro-growth agenda is already shaping market positioning and portfolio decisions.