The result of this weekend’s Upper House election in Japan may not reverse the recent rout at the very long end of the JGB market when it re-opens after a holiday on Monday, given the possibility that fiscal policy will be loosened in due course. But today’s rebound in the yen suggests the outcome of the election may have been largely anticipated. And we doubt the sell-off in this part of the curve will gather steam given what’s now discounted in OIS markets.
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