How Japan's markets reacted to election of first female prime minister Sanae Takaichi

By Geo News Digital Desk
October 21, 2025

Markets bet on spending as Takaichi becomes Japan’s first female PM

How Japan's markets reacted to election of first female prime minister Sanae Takaichi

Japan’s financial markets delivered a mixed verdict on Tuesday, October 21, as Sanae Takaichi has formally elected the nation’s first female prime minister, with stocks etching out a fresh record and the yen weakening on expectations of continued fiscal stimulus.

The Nikkei 225 index rose 0.3% at an all-time high of 49,316.06 in a volatile session which saw the benchmark swing from a 1.6% gain to a slight loss before settling in positive territory.

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Meanwhile, the Japanese Yen dropped by 0.5% against the U.S dollar and was trading at 151.36.

The Japanese yen, meanwhile, fell 0.5% against the U.S. dollar, trading at 151.36.

The market movements reflect what analysts have dubbed the “Takaichi trade,” a bet that her administration will prioritize heavy government spending and maintain loose monetary policy.

This combination is typically positive for export-oriented stocks but negative for the currency.

"The new Takaichi trade is more of a flattening of the yield curve and a stock market rally driven by domestic demand stocks," said Naka Matsuzawa, chief macro strategist at Nomura Securities.

However, the rally lost significant momentum throughout the day as investors took profits and considered the potential limits of Takaichi's power.

Her party leads a minority government after its long-time coalition partner, Komeito, split from the alliance, forcing a last-minute partnership with the Japan Innovation Party.

This political reality has tempered the initial euphoria.

"We think the administration will be compelled to take a pragmatic approach to economic policy and do not expect the Takaichi trade to gain significant traction in the medium term," noted Yusuke Matsuo, a senior market economist at Mizuho Securities.

The market's cautious optimism now shifts to the composition of Takaichi's cabinet for clearer signals on her government's economic direction.

The appointment of key ministers will determine whether the historic “Takaichi trade” evolves into a sustained market trend or proves to be a short-lived reaction to a landmark political event.


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