(Bloomberg) — The yen fell modestly after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.

Japan’s currency dropped 0.3% to 157.62 per dollar in early Asian trading Monday, reaching the weakest in more than two weeks. The LDP secured a two-thirds super majority in the 465-seat lower house by itself, according to public broadcaster NHK. The LDP’s haul of seats gives it the highest proportion of representatives in the lower house of any party in post-war elections in Japan.

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Concerns that Japan is spending beyond its means have increased pressure on the yen and the nation’s government bonds since Takaichi called a snap election last month and announced plans to temporarily cut the sales tax on food. Many investors see an election victory for Takaichi as allowing her to add to Japan’s already heavy debt load.

“A decisive electoral victory is likely to reinforce expectations of proactive fiscal policy in the near-term, encouraging short-term yen selling,” said Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo.

Further declines in the yen would push it toward levels where authorities previously intervened in the market. Traders will be watching the level of 159.45 per dollar reached in mid-January, the yen’s weakest since 2024. The slide to that area last month fueled speculation Japanese authorities might step in to support their currency.

Japanese officials have indicated they’re more concerned about volatility and the pace of currency moves rather than specific levels.

Persistent yen weakness is already feeding back into expectations for the Bank of Japan’s policy path. Overnight index swaps show a growing chance of a rate hike by April.

The yen strengthened abruptly on Jan. 23 on reports of rate checks by the Federal Reserve Bank of New York. But the currency has since weakened anew after US Treasury Secretary Scott Bessent later said the US is “absolutely not” intervening in the currency market. Takaichi’s comment that a weak currency can be a major opportunity for export industries added to the yen’s recent decline.

“Watch for rising verbal intervention as USD/JPY edges closer to 159,” Chidu Narayanan, chief Asia-Pacific strategist at Wells Fargo, wrote in a note to clients. “We see the risk of further USD/JPY upside near-term, with actual intervention likely closer to 162.”