Japan Stocks Soar, Yen Slumps as Takaichi Win Fuels “Abenomics 2.0” Bets

Japan’s financial markets surged Monday in response to the election of Sanae Takaichi as leader of the ruling Liberal Democratic Party, positioning her to become the country’s first female prime minister. Equities rallied sharply, with the Nikkei 225 jumping about 5% to record highs, while the yen and long-term bonds tumbled. 

The move caught investors off guard, shifting expectations about Japan’s economic direction. Markets now price in more fiscal stimulus, continued monetary easing, and a weaker yen—a reversal from tighter policy bets earlier this year.  Bond yields, especially on long-dated government debt, rose amid fears that higher deficit spending could strain Japan’s debt management. 

Sectors expected to benefit—such as defense, nuclear, semiconductors, and heavy industry—saw strong gains. Companies like Mitsubishi Heavy Industries and Japan Steel Works outperformed, as investors bet on government support for strategic industries.  Meanwhile, the yen slipped nearly 2% versus the U.S. dollar, breaching key levels around ¥150. 

Still, uncertainty looms. Political constraints within the LDP, balancing stimulus with fiscal discipline, and coordination with the Bank of Japan are all potential flashpoints. The days ahead will be closely watched as Takaichi’s policy choices—and their clarity—shape whether the “Takaichi trade” can sustain.