Japan’s stock market surged Tuesday as the Takaichi trade boosted investor optimism. Sanae Takaichi became Japan’s first female prime minister. The Nikkei 225 Index closed at a record 49,316.06, up 0.3%. Consumer and domestic demand stocks led the gains. The broader Topix index remained near flat. Government bonds rallied, and the yen fell to 151.36 against the U.S. dollar.
Earlier, the Nikkei rose 1.55% but lost some gains after Takaichi won 237 votes in the 465-seat lower house. The Takaichi trade had already driven equities higher and bonds lower. Her rise faced delays when Komeito initially split from the coalition. A new coalition with the Japan Innovation Party strengthened her support. This development reinforced the Takaichi trade.
Experts caution that her minority coalition could limit fiscal ambitions. Mizuho Securities economist Yusuke Matsuo said the administration may take a pragmatic approach. This could temper the Takaichi trade’s medium-term impact. Investors now focus on cabinet appointments. Takaichi plans to name Satsuki Katayama, a former regional revitalization minister, as finance minister. Katayama has urged caution on the yen and highlighted Japan’s strong economic fundamentals.
Stocks reflected cautious optimism. Video game maker DeNA rose 6.6%. Online retailer ZOZO gained 4.1%. Overall, 125 Nikkei stocks advanced while 99 declined. The 10-year government bond yield fell one basis point to 1.655%. Nomura Securities strategist Naka Matsuzawa said structural reforms and strategic investment could shape an updated Takaichi trade. He warned momentum may fade as investors reassess reflationary policies. The Takaichi trade has already affected markets, reflecting hope for stimulus and caution over political constraints.
