• Three Prime Ministers stepped down in the space of a week (Nepal, Japan, France).
• Both the Japanese and French Prime Ministers lasted less than a year, with their own parties losing confidence.
• France has the third highest level of debt in the Eurozone at 114% of GDP which is causing a political headache.¹

There has been a wave of political upheaval in the past couple of weeks. We saw three Prime Ministers resign including Ishiba of Japan on September 7, Oli of Nepal on September 9 and Bayrou of France on September 9. Angela Rayner, Deputy Prime Minister of the UK, also resigned after she failed to pay enough tax on a property purchase, and there was a successful assassination attempt in the US on Charlie Kirk, a conservative activist and close ally of President Trump.

Japan

Ishiba only lasted 11 months as Prime Minister of Japan. The writing was on the wall for Ishiba who lost a majority just weeks into taking office by calling a snap election. His party was unhappy, as were the public, evidenced by plunging approval ratings, and he resigned a day before what was essentially a no-confidence vote against him. The next PM of Japan has a tough job ahead, although this will sound familiar: uniting a fractured party, regaining public trust, and navigating a tough macro landscape filled with trade policy uncertainty and geopolitical tensions.

What does this mean for markets though? Well, short-term volatility is to be expected, but Japan already had uncertainty with the lack of a majority and rising inflation. In the medium-long term this should be beneficial as the next candidate will have a fresh chance to restore voter confidence. At least a trade deal with the US has been completed, so that is one less distraction for the government now. The Yen slid this week, whilst Japanese stocks have rallied (up 3% on the week), and actually the frontrunner, Takaichi, wants to increase government spending which could push stocks higher.

France

It’s a similar story in France with French Prime Minister, Francois Bayrou, resigning after just nine months in office following a no-confidence vote from his party. France’s problem is its debt crisis that Bayrou intended to tackle through slashing government spending. At 114% of GDP, France’s debt is the third highest in the Eurozone after Greece and Italy. However, public debt continues to soar in France, and budget cuts have not gone down well with parliament. Instead, the left have been calling for tax rises. It’s not worlds apart from the situation the UK finds itself in, trying to fill a ‘black hole’ and facing the same difficult decision of higher tax or less spending. Maybe we should all take a page out of the US’ handbook: just ignore it. The chart below shows the total debt of G7 countries as a percentage of GDP.

Source: Rising G7 debt back at centre of bond market storm | Reuters

Of further concern might be the future direction of travel for several major economies. The chart below from the OECD shows the general government deficit i.e. the balance of income and expenditure of governments, for several major economies.

Source: General government deficit | OECD

Bowmore portfolios

Portfolios have a healthy overweight to Japanese equities, where we are excited about the governance reforms happening in the region. A government without a majority is a pair of economic handcuffs, and so we are pleased that politics in the country now has a chance to unite to tackle rising inflation and wage growth, and on the back of a trade deal. The market is clearly thinking along the same lines with the recent surge in Japanese stocks, although we will continue to stay clear of Japanese government bonds.

Just 1% of our Equity exposure is to France. We like some of the economic stories coming out of European countries, like Germany’s government stimulus package (who can afford to increase their spending given the low levels of debt seen in the above charts), but France is not one of them. It is very unlikely our exposure to the region will move any higher than 1% this year or next, and whilst politics is not the main driver of stock market returns, uncertainty can be painful as we witnessed in US trade policy in April.

Source: LSEG DataStream, data as at 12/09/2025

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.

Sources:

¹ BBC: Why the French PM had to go and what happens next? September 2025