Instability in Japan, France and the UK will have global consequences for the bond markets, says Helen Thomas

For investors, the message is simple: political risk is rising. From Tokyo to Paris to London, governments face competing imperatives – fiscal credibility, economic stimulus and electoral survival. Sanae Takaichi, the new leader of Japan’s ruling LDP, is ruffling the feathers of her coalition partners; Emmanuel Macron has just churned through yet another Prime Minister; and Keir Starmer got a post-conference bounce, but only for Nigel Farage. The autumn government bond auction calendar is heavy, and bond buyers are becoming more discriminating. A political spark in any country could light up the huge pile of Covid-induced government debt. As the fourth quarter begins, global sovereign markets are set for a turbulent ride.

Sanae Takaichi’s reflationary ambitions may yet breathe new life into Japan’s long-stagnant economy. She has a soft spot for Abenomics, having served Shinzo Abe in a number of senior cabinet positions. But bond markets are unsettled by her gung-ho embrace of Abe’s Three Arrows which was imposed at a time of chronic deflation rather than the decades-high inflation the country is now experiencing. Upon........

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