This report does not constitute a rating action. SINGAPORE (S&P Global Ratings) Feb. 9, 2026--Japan's incoming Liberal Democratic Party (LDP)-led government is likely to cut selected consumption taxes while increasing social and defense spending. If nominal GDP and revenue growth maintain their momentum of the past two years, the larger fiscal deficit may have little material effect on credit support for the Japanese government. However, downside rating strain could intensify if economic conditions worsen. The LDP won 316 seats in the snap election on Feb. 8, 2026. This returns the party to government with a stand-alone supermajority. We believe the LDP-led government will take a more expansionary approach to fiscal policy, with fiscal consolidation less of a priority. The government
