Investors Scramble as Japan’s Takaichi Aims to Cement Grip on Power

The Takaichi trade is back on after the Japanese prime minister moved to strengthen her grip on power. Left with nowhere else to run, investors responded by sending Japanese stocks to record highs and selling the yen and government bonds.

With her popularity riding high, Sanae Takaichi conveyed her intention to call a snap election to senior officials in her ruling Liberal Democratic Party, Kyodo News reported. Takaichi plans to announce a dissolution of the lower house of parliament at the start of the next parliamentary session on Jan. 23. The Yomiuri newspaper reported late Friday that Takaichi may call for a vote on Feb. 8 or Feb. 15, citing unidentified government officials. The ruling bloc currently has a razor thin majority of 233 seats out of 465. The move is seen as a bid to solidify support for her hawkish political stance and her pro-stimulus policies.

The Nikkei 225 and Topix stock benchmarks both rose over 2% to hit fresh intraday records following the news, and, if history is anything to go by, are likely to keep rising. The yen meanwhile slipped as much as 0.5% to its weakest level against the dollar since July 2024 and Japan’s 30-year government bond yield surged as much as 12 basis points to 3.52%. The market reaction mirrors the stock buying and bond selling triggered by Takaichi’s appointment as prime minister last year. Her aggressive fiscal spending policies have helped lift Japanese equities to multiple record-highs, while keeping JGBs and the yen under pressure.