Written by Shane Balkham
Overnight, Japan’s governing Liberal Democratic Party (LDP) has won a two-thirds majority in the lower house, the first time this has ever happened, which means the upper house cannot stop legislation. It is relatively rare that elections provide so much clarity, as Prime Minister Sanae Takaichi will be running the country with minimal domestic obstacles for the next couple of years.
Takaichi has a clear plan of what she wants to achieve and has the mandate to deliver it. She is prepared to boost spending to help Japan regain some global influence and is aided by corporate governance reforms that have finally gained some traction.
The next focus for Prime Minister Sanae Takaichi is the budget and how a proposed consumption tax cut on food will be financed. So far, Japanese equities have reacted positively, however Japanese bond investors are likely to be somewhat cautious, as bond markets tend to dislike extra borrowing that may arise.
The US has several points of concern. President Trump signed a bill ending the government shutdown, which was a muted relief. The failure of the US government to function properly has become so commonplace that financial markets barely registered. However, because of the US government shutdown, the US Employment Situation report has been delayed until this week, while last week’s job openings were very weak and initial jobless claims came in above expectations. This has rekindled concerns over softness in the US labour market.
The Bank of England (BoE) held interest rates constant at last week’s Monetary Policy Committee, however the narrowness of the decision at 5-4 and accompanying rhetoric has increased the expectancy of an interest rate cut at the next meeting on 19th March. The Bank’s recent forecasts for inflation show an expectation for Consumer Price Inflation (CPI) to fall back towards the target of 2% from April. There is acknowledgement that the risk of greater inflation persistence has reduced, while evidence of subdued economic growth, slack in the employment market, and wage growth easing points to future rate cuts in 2026.
The closely divided BoE decision increased markets’ conviction of these future interest rate cuts. The UK’s backdrop does give the BoE flexibility to deliver several cuts over the year, especially when reading the comments from the Committee’s members, which now sees the risk of leaving rates too high as a greater risk than returning inflation.
This year has continued to demonstrate the importance of being appropriately diversified over the long-term to deliver strong outcomes for our clients, particularly during periods of market stress. Having differentiated returns from various geographical areas and asset classes, such as those mentioned in this update, is an antidote to the short-term market uncertainty and geopolitics.
All performance figures are stated in Sterling terms, unless otherwise specified.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th February 2026.
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