Japan Markets ViewU.S. Long-term Interest Rates May Rise if Trump Wins Presidential Election – QUICK Panel Discussion

 

[Nikkei QUICK News] On July 24, QUICK, a financial information provider in Japan, held a panel discussion titled “How the U.S. Presidential Election Will Affect the Economy and Markets.” Regarding the impact of the U.S. presidential election to be held in November on financial markets, some pointed out that “there is a strong possibility that U.S. long-term interest rates will rise” and “it is dangerous to assume that the dollar market will move in one direction” if former President Donald Trump, the Republican candidate who advocates expansionary fiscal policies, is elected.

 

Takashi Imamura, Representative of Marubeni Research Institute, delivered a keynote speech, warning, “If Trump’s policies on tariffs and the revival of U.S. manufacturing industry are taken, as he emphasizes, global fragmentation would accelerate. In addition, some estimates suggest that global gross domestic product (GDP) would decline by 7%.”

 

With President Joe Biden withdrawing from the presidential campaign, there is a growing expectation that Vice President Kamala Harris will be chosen as the Democratic nominee. Mr. Imamura noted, “If Vice President Harris becomes the candidate, the black and young supporters who stayed away under the Biden Administration may return, and the election will be a close race with Mr. Trump.”

 

The panel discussion featured the following speakers: Daisuke Karakama, chief market economist at Mizuho Bank; Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank; and Chisato Haganuma, chief strategist at Mitsubishi UFJ Trust and Banking.

 

Regarding the impact of the U.S. presidential election on the bond market, Ms. Sera remarked, “Republicans have shown more expansionary fiscal policies, such as tax cuts, than Democrats. If Mr. Trump is elected, U.S. long-term interest rates may rise in relative terms.” She indicated that the market would be further affected by a “triple-red” scenario, in which Republicans win not only the presidential election but also both the House and Senate.

 

Mr. Karakama, an expert on the foreign exchange market, noted, “Mr. Trump seems to favor a weaker dollar, but his presidency resulted in a stronger dollar. It is dangerous to assume that the dollar will move in one direction if he wins the election, as he does not seem to have a clear view on monetary policy.” He indicated that the Federal Reserve Board’s (FRB) monetary policy operations would not be affected by the election. He expects the FRB to cut interest rates twice in 2025, in March and June, saying, “Even if the Trump administration takes office, the impact of (inflationary) policies will not be reflected in economic indicators until the middle of next year. Until then, it will remain conducive to interest rate cuts.”

 

Mr. Haganuma commented on the equity market, “Republican policies have not changed much since the last Trump administration. Therefore, the impact of the economy and business performance is more significant than the outcome of the election.” He pointed to the growing budget deficit and weak consumer spending in the U.S. “The U.S. economy is weak. Even if the FRB cuts interest rates, it doesn’t necessarily mean stock prices will stop falling,” said Mr. Haganuma.

 
(Reported on July 25)

 

 

About QUICK Panel Discussion：
QUICK Panel Discussion was held as part of a seminar based on the “QUICK Monthly Survey.” This is one of Japan’s largest surveys on the market outlook and investment stance. For about 30 years, QUICK has been surveying market participants, such as traders, analysts, and institutional investors in the equity, bond, and foreign exchange markets.

 

 

QUICK Monthly Survey on QUICK Data Factory
https://corporate.quick.co.jp/data-factory/en/product/data012/

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