Prime Minister Sanae Takaichi's Liberal Democratic Party is likely to increase its number of parliamentary seats and gain a majority in the lower house, a preliminary survey by the Nikkei newspaper showed on Thursday (29 January).
Takaichi called the snap general election to seek a mandate to gear up her expansionary fiscal policy, a move that triggered a spike in bond yields on market concerns Japan may be forced to issue additional debt.
While still early in the race, the LDP is gaining momentum and likely to see its seats exceed the 233 majority of 465 up for grabs in the lower house, up from 198 seats it holds before the election, the Nikkei said.
Heavy snowfalls blanketing northern parts of Japan could depress voter turnout and disrupt campaigning, particularly in rural areas, adding another layer of uncertainty to the snap vote.
The LDP currently forms a ruling coalition with the Japan Innovation Party, or Ishin, which together narrowly hold a majority in the powerful lower house. It is a minority in the upper house.
The survey combined the paper's reporting and findings of a poll conducted jointly with the Yomiuri newspaper on 27- 28 January, the Nikkei said.
Meanwhile, the spectre of coordinated yen buying by Tokyo and Washington has propped up Japan's currency, but history suggests the impact of an actual intervention could be limited, especially because Takaichi is basing her snap election campaign on expanded stimulus measures.
The yen's protracted decline this year has become a symbol of the market's escalating worries over Japan's financial health. Its relentless march lower has come as Japanese government bond yields have soared to record highs, which would ordinarily be supportive of the currency.
"The currency is reacting aggressively," said Toshinobu Chiba, a Tokyo-based fund manager at Simplex Asset Management, who believes the yen could spiral to as weak as 180 per dollar for the first time since 1986, a year after the Plaza Accordallowed for a major depreciation of the dollar, if Takaichi scores a big election win and has a mind to expand her stimulus plans.
Chiba, like many market participants, expects dollar-yen levels beyond 160 to trigger an initial round of intervention, "but there's not so much impact the Ministry of Finance can have on the market."
That's because "most investors do not trust Japan's fiscal control," he said. "It's a sovereign credit issue."
Japan's government debt already stands at roughly 230% of gross domestic product, the highest in the developed world.
Now Takaichi - along with her main political opponents - has pledged to suspend the consumption tax on food - the source of around 5 trillion yen ($32.36 billion) in revenue a year - without saying how she will make up the shortfall.
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