Kohsi Sanae's cabinet is walking a tightrope between fiscal stimulus and market confidence. There are advisers suggesting to first stabilize the market.

Multiple economists who are members of a key government task force within a private sector department in Japan said on Thursday that, even as the Japanese government led by Prime Minister Takamori Osanae increases fiscal spending to revive Japan's economic growth and promote a healthy economic cycle, measures must be taken to maintain market trust in its true fiscal situation, and in the current volatile market environment, priority should be given to stabilizing debt and the yen. They stated that Japan's economy unexpectedly contracted in the third quarter, while inflation remains at a historically high level of around 3%, mainly due to rising food prices. These members, in a formal proposal submitted to the Japanese government, stated, "Therefore, the government must take necessary and sufficient fiscal stimulus measures, while also making continuous investments in crisis management and growth areas." The proposal stated that "the most important thing is to ensure the sustainability of Japan's long-term fiscal spending and market trust in its fiscal system," for example by cutting existing wasteful expenditures. The proposal also stated that in this process, the new cabinet led by Takamori Osanae must use various means when formulating fiscal policies, and must "always pay attention to interest rates, government bond yields, exchange rates, and stock market trends." Recently, it has been widely anticipated in the market that the large-scale fiscal spending plan led by Prime Minister Takamori Osanae will result in a greater issuance of long-term (10 years or more) sovereign bonds and more persistent inflation, causing both Japanese long-term bond prices and the yen to weaken. This professional proposal regarding Japan's fiscal sustainability has been included in a joint statement issued by four members of the private sector department, including former Deputy Governor of the Bank of Japan Masumi Wakatabe and senior economist Toshihiro Nagahama, who is considered an advocate for Takamori Osanae's inflationary policies. This proposal they lead will be included in the discussions and specific deliberations of Japan's Economic and Fiscal Council, an organization mainly responsible for coordinating Japan's fiscal blueprint and long-term economic policies. Recently elected Japanese Prime Minister Takamori Osanae is a conservative nationalist who counts former British Prime Minister Margaret Thatcher as one of her role models. She has long been an ally of Japan's longest-serving Prime Minister, Shinzo Abe, and a staunch follower of Abe's economic and social policies. This is why the current financial markets are starting to bet on the return of "Abenomics." The so-called "Takamori Osanae trade" that has recently been hot globally refers to the expectation that financial markets will experience sharp fluctuations in stocks, bonds, and currencies after Takamori Osanae's victory as the new leader of the Liberal Democratic Party and the expectation of a return to "Abenomics" as the core policy. However, the yen and Japanese government bonds may enter a long-term pessimistic trajectory due to Takamori Osanae's plan to introduce large-scale stimulus policies. For Japanese bonds and the yen, recent news suggests that the party alliance led by Takamori is likely to secure a majority in the lower house, which confirms the path of "continuing loose fiscal policy and increasing debt issuance," a major negative for bonds and currencies. Especially for long-term Japanese bonds (10 years or more), they may enter a new cycle of soaring yields, leading to significant market volatility globally.