There’s trouble in bond land and the epicenter’s Tokyo.

Three months into her tenure, Japanese Prime Minister Sanae Takaichi’s riding a sugar high from an approval rating well north of 60%. That’s high enough to suggest the composition of Japan’s lower house of parliament doesn’t reflect the current level of public support for the Liberal Democratic Party.

A quick trip down memory lane’s in order. LDP — which has piloted more or less every Japanese governing coalition of the country’s post-War democracy — lost its lower-house majority in October of 2024 then its upper-house majority in July 2025, effectively forcing Takaichi’s hapless predecessor, Shigeru Ishiba, to step aside less than two months later, setting the stage for Takaichi’s premiership.

In Takaichi, Japan’s first female prime minister, some saw a new dawn for the land of the rising sun, but that characterization always struck me as a grandiloquent misnomer.

Takaichi’s politics isn’t exactly “new.” In a lot of respects, her platform’s just Shinzo Abe resurrected and recycled. And personally, Takaichi styles herself after Margaret Thatcher, a 1980s callback so clichéd it may as well come with big hair and a John Hughes film.

That said, Takaichi’s somewhat unique in bridging establishment Japanese politics and right-wing populism, all colored by what it’s fair to call aggressive nationalism.

Although one could’ve imagined worse outcomes for JGBs when the Japanese electorate rejected Ishiba’s program, Takaichi’s brand — an amalgamation of Abenomincs, audacity and populism — isn’t the stuff fiscal discipline’s made of, her pretensions to Thatcherism aside.

As I put it on September 7, “There’s virtually no prospect of Japan moving in a more fiscally conservative direction after Ishiba, so one can only assume his departure will be seen as another insult to injury moment for the global DM long-end.”

Fast forward four months and Takaichi, keen to exploit her cabinet’s sky-high approval rating, is calling a snap vote for Japan’s lower-house, the more powerful of the two chambers. The idea, obviously, is to increase her legislative clout on the way to pushing for more vis-à-vis a fiscal agenda that’s already — and I’ll use a polite euphemism — proactive.

Among other things, Takaichi promised to cut the sales tax on food. “I signed an agreement in October to not apply the sales tax on food for a limited period of two years,” she said Tuesday. “There was some debate within the LDP, but we have decided to include this in [our] campaign pledges.”

The cost of that tax cut is seen at almost $32 billion annually, and that’s just one policy. Tellingly, Takaichi hasn’t yet said how she intends to fund the cuts.

JGBs aren’t loving it, and it didn’t help that a 20-year sale on Tuesday saw poor demand. Super-long yields soared, with the 40-year breaching 4%, the highest since the tenor’s introduction.

As the figure shows, Tuesday’s selloff amounted to 28bps, and that was on top of Monday’s fireworks. We’re looking at more than 40bps in two sessions. (To quote Frank Ricard, “Is this bad? Is this bad?”)

Not to put too fine a point on it, but that ain’t gonna work. That’s nearly half a point on long-term government borrowing costs in 48 hours. And this at a time when the BoJ’s trying to navigate a very dicey path out of Haruhiko Kuroda’s monetary Neverland.

This looks like a no-win situation for JGBs to me. There’s no way to fund (another) fiscal expansion in Japan except through issuance, which means the long-end will trade heavy on expectations for more supply assuming Takaichi’s snap vote pays off.

If the vote doesn’t pay off, she’ll probably have to step down just four months into the job. That sounds like a recipe for uncertainty or maybe even low-intensity chaos. (Donald Trump, you’re reminded, loves Takaichi.)

On Tuesday, Takaichi’s chief cabinet secretary said, “We’ll make sure to gain market trust through a sustainable fiscal policy.” Ultimately, he went on, Takaichi will “bring down [Japan’s] debt-to-GDP ratio.”