How worried should investors be about Takaichi’s policies?

While PM Takaichi intends to abandon “excessive austerity” and is trying to steer the BoJ in a more dovish direction, we don’t believe that her policies pose a major risk for Japan’s economic outlook. In particular, we expect the budget deficit to remain very low by historical standards, which should allow the ratio of debt to GDP to keep falling. And even though Takaichi has started to stack the BoJ’s Board with doves, that won’t prevent the Bank from tightening policy further.