Why Japan’s prime minister might call a snap election

0:28Good morning from the Financial Times.

0:35President Trump refused to rule out whether military action in Iran is still under consideration. Here he is in the Oval Office yesterday. Does this mean military action is now off the table against Iran? We're going to watch and see what the process is, but we were given a very good statement by people that are aware of what's going on. He said he'd received assurances that Iran had stopped killing protesters. People have taken to the streets in outrage for the past two weeks over economic hardship. Trump said on Tuesday, quote, help is on the way. Yesterday, the U.S. began evacuating some personnel from its largest base in the region in Qatar, which hosts 10 ,000 troops.

1:18U.K. officials, meanwhile, said some of its own military personnel have also left the base. Despite Trump's more measured tone in the Oval Office later in the day, there were concerns that any U.S.-led military action in Iran could lead to unrest in the wider region.

1:39Japan's Prime Minister, Sanae Takeichi, wants to call a snap general election. That's according to her coalition partner. The vote could come as soon as February. Speculation around the election has driven Japanese stocks to a series of record highs this week. Investors are betting that Japan's first female prime minister will secure an easy victory and will open the door for more stimulus. I'm joined by the FT's Leo Lewis in Tokyo to discuss this. Hi, Leo. Hello. Leo, Takeichi has only been in office since October. Why call an election now? So Takechi has indeed only been prime minister for about three months.

2:19But in that time, her popularity has been extremely high. And the view is that she wants to use that personal popularity to drag her party back from the position that it's in. That's the ruling Liberal Democratic Party, which is a little bit fragile. It rules through a coalition. It would obviously rather just have a straightforward majority in the powerful lower house of parliament, which is something that it lost in 2024. So she wants to restore the fortunes of her party, and she thinks that now is the time to go for it. So I mentioned that markets have been surging this week. Why do they like the idea of Takeichi staying in office?

3:03The markets like the idea of stimulus, or particularly the equity markets like the idea of stimulus. If you look at the stocks that have really been leading the way up, it's not terribly surprising that they should be led by tech, by defense, by companies that are exposed to Japan attempting to wean itself off reliance on Chinese rare earths. So there's some sort of material related companies there. And this is a rally that is quite broad. The banking system is likely to benefit if interest rates continue to rise. The yen has weakened because there is, underneath all this, a concern that the spending plans could leave Japan a little more fiscally stretched.

3:46So markets have been excited by the idea of this election, but taking different bets on what that really means for the Japanese economy and for Japanese companies. What have been some of the highlights of her tenure so far? Well, that is a little difficult to sort of put a finger on in substantive terms. She's certainly talked a good game on what she plans to do for the economy. She's got a big stimulus package that she's trying to push through. She's focusing on areas of industrial stimulus and growth that are exciting AI and tech data centers. And she conducted a pretty successful summit meeting in Japan with Donald Trump.

4:26She's been embroiled in a row, an ongoing row with China and has adopted a very tough stance on that. She hasn't backed down despite quite serious actions by China to convince her to do so. And rather than seeing the economic dangers of a long spat with China, the general public in Japan seems to like the idea that she knows how to stand her ground. What kind of problems would she face if she does win the election? So if she gets elected and wins a decent-sized mandate, She's still a prime minister of Japan, and that comes with it a very severe demographic set of issues. Labour shortages are starting to bite very hard.

5:09The country has come out of a long period of stagnant prices and deflation into one where prices are rising. And individual households across the country are finding that pretty tough. There's a number of issues. The rubber hasn't really hit the road on. Japan is vulnerable because it relies on imported energy and imported food and is quite vulnerable to rising prices, especially since the yen is very weak at the moment. Leo Lewis is the FT's Tokyo Bureau chief. Thanks, Leo. My pleasure. up.

5:49The giant bond fund manager PIMCO is diversifying away from U.S. assets because of President Trump's, quote, unpredictable policies. Those have caused flare-ups in market volatility. That's what PIMCO Chief Investment Officer Dan Iveson told the FT. This comes just a few days after Federal Reserve Chair Jay Powell said he was the subject of an investigation by the U.S. Department of Justice. The market response to the DOJ's move has been pretty muted, but Wall Street executives have said the investigation has made them more concerned that Trump is eroding the Fed's independence. Trump is pushing the central bank to lower interest rates, which could ultimately cause inflation to jump.

6:30One senior Wall Street trader at a large firm told the FT that Trump's moves on the Fed would weaken the central bank's credibility, and that would hurt its ability to fight crises.

6:47America's biggest banks are pushing back against President Trump's call for a cap on credit card interest rates. It's part of an effort from the administration to address America's affordability problems. But does the president actually have the power to control credit cards? The FT's U.S. banking correspondent, Akilah Kineo, is here to break this down. Hi, Akilah. Hi. Before we get into the big question, let's talk about what exactly the president wants to do. What is he proposing? Right. So the proposal is slightly vague. It was made on Truth Social last week. It's vague in how it would be implemented.

7:22But what he's proposing is that credit cards, interest rates in the U.S. should be capped for one year at an interest rate of 10%. So he claims that he wants to help the American public and consumers who are hugely reliant on credit cards. And he wants to help them not be, quote unquote, ripped off by credit card companies. We know the average credit card rate in the U.S. is about 20%. He wants to cap that, which would hugely impact banks and credit card companies' profitability. How has this proposal gone down with them? So not well. It was interesting timing because the largest U.S. consumer banks all reported their fourth quarter earnings this week.

8:08And inevitably, they were all asked about what they made of this proposal. And some of the largest banks, including JP Morgan, Citi and Wells Fargo, all essentially said it's great that the president is looking at affordability, but that's not the best way to fix that. and actually capping interest rates would have adverse effects on the economy because what they're saying is that it would hit their profits, meaning that lending to certain customers would become prohibitive. And so there would be a contraction of credit in the economy, which would in turn slow down growth. The banking lobby is ready to fight on this.

8:44And actually, even JP Morgan's CFO said on Tuesday that everything was on the table, including potentially illegal challenge if things were to progress with this. So not terribly surprising that the banks would be opposed to this, but not everyone is against this plan, right? Yeah, and this plan, I should say, has been floated before by Trump actually on his campaign trail in 2024. There's also already a bill in Congress that's got support from Democrat Senator Elizabeth Warren and Bernie Sanders. and we've also seen the chief executive of Klarna, the buy now pay later company, come out in favor of the plan, which I should say is also not surprising because his consumer lending is one that does not have interest.

9:33So he would kind of stand to benefit. But I guess the question is, does the president have the ability to actually make a change like this? So he doesn't have the authority to do it by executive order. So it would have to be done through Congress. So he would need to kind of push to get more support and get that through. One important piece of context when we try to understand why he's doing this and why he's doing this now is that the president has been on a relentless campaign to get the Federal Reserve to bring down borrowing costs in the U.S. That's been unsuccessful. So one of the other levers he sort of has to bring down borrowing costs for consumers is to look at directly changing the interest rate on credit card debt.

10:18So Akilah, what are you looking out for next when it comes to this story? So I expect if the president continues to push this plan, despite some pushback from the banks and actually from also Speaker of the House, I expect there will be a big lobbying campaign, a big fight in Congress on whether there is a cap at all, but also whether 10 % is an appropriate rate to set it at. It's all kind of speculative. And there's basically just been a post on social media and it's not quite clear what the next steps are. So everyone's waiting on the president, I guess, to outline that as well. Akilah Quineo is the FT's U.S.

11:00banking correspondent. Thanks, Akilah. Thank you. Just a friendly reminder that we are running a promotion on digital access to the FT. The Financial Times brings you the latest news, but more importantly, you get a true understanding of what's going on. You get to know the why behind the news. Now you can get 40 % off the normal price of an online subscription. Just go to ft.com slash briefing sale. Of course, we will also have that link in the show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

11:39Thank you.