Takaichi's Approval Ratings Plunge as Yen Hits Four-Decade Low

Japanese Prime Minister Sanae Takaichi faces a daunting challenge as her approval ratings plummet, making it increasingly difficult to implement promised tax cuts and stabilize the bond market.

Takaichi's dovish fiscal policy has sparked concerns about Japan's worsening finances, sending bond yields soaring to three-decade highs in July. Despite repeated assurances from Finance Minister Satsuki Katayama that the government will keep debt issuance within a reasonable range, investors remain skeptical.

The yen has also suffered significantly under Takaichi's expansionary policy, sliding to a four-decade low as markets lose trust in Japan's fiscal discipline. The government's efforts to talk down speculative bets against the yen have been unsuccessful, with top currency diplomat Atsushi Mimura remaining quiet since a record $72 billion intervention in April.

Takaichi has sought to balance her pro-growth agenda with investor concerns about fiscal discipline and central bank independence, but this communication challenge has led to unwanted market volatility. As the government prepares to proceed with plans to cut an 8% levy on food, analysts warn that a lack of funding clarity could further upset bond markets.