Japan’s financial markets surged on Monday after Sanae Takaichi was elected as the new leader of the ruling Liberal Democratic Party (LDP), positioning her to become the country’s first female prime minister. The Nikkei 225 index hit a record high, climbing 4.75% to 47,944.76, while the broader Topix index rose 3.1% to 3,226.06.
Nikkei 225 Hits Record High
The rally was fueled by investor optimism surrounding Takaichi’s pro-market policies. Key sectors driving gains included technology, real estate, and industrial stocks:
- Yaskawa Electric Corp: +20%
- Japan Steel Works: +14%
- Mitsubishi Heavy Industries: +13%
- Kawasaki Heavy Industries: +12%
Analysts attribute the surge to expectations that Takaichi will continue Abe-style economic policies, including public-private investment initiatives and stimulus measures.
Yen Weakens Amid Policy Expectations
Following Takaichi’s election, the Japanese yen weakened past 150 against the US dollar, a level not seen since August. Finance Minister Katsunobu Kato expressed concern, but analysts suggest the yen’s depreciation is likely a short-term market adjustment.
Takaichi’s approach may include modest rate hikes from the Bank of Japan by January 2026 while maintaining her “high-pressure economy” strategy to boost growth.
Sanae Takaichi’s Policy Vision
Takaichi, 64, is known for her hawkish stance and admiration for leaders like Margaret Thatcher. Key priorities include:
- Strengthening Japan’s defense capabilities
- Boosting industrial competitiveness
- Addressing demographic challenges, such as an ageing population and rising debt
- Expanding public and private investment to drive economic growth
Global Market Reactions
Internationally, investor sentiment was mixed:
- Hong Kong Hang Seng Index: -0.22%
- Australia S&P/ASX 200: flat
- Mainland China, Taiwan, South Korea: markets closed for holidays
Additionally, unconfirmed reports of US tariff easing on auto parts supported Japanese automakers. Toyota rose 4.9%, while Honda gained 4.7%. Rising oil prices after a modest OPEC+ production increase also supported energy-linked stocks.
Wall Street Update
Wall Street ended last week on a positive note, with:
- S&P 500: 6,715.79 (+0.1%)
- Dow Jones Industrial Average: 46,758.28 (+0.5%, record close)
- Nasdaq Composite: 22,780.51 (-0.3%)
Market Outlook
While Japan’s markets currently show optimism, analysts caution that the Nikkei 225 may face short-term corrections before year-end. Takaichi’s success will depend on navigating the political landscape and securing support for her proposed economic reforms.
