Tokyo Stocks Surge 4% After Takaichi Wins Japan Ruling Party Leadership

Tokyo stocks surged to record highs, rising nearly 5%, while the yen weakened significantly following the election victory of Sanae Takaichi as the leader of Japan's ruling party. Takaichi, expected to become prime minister soon, is known for supporting aggressive monetary easing and increased government spending to stimulate Japan's economy, particularly targeting inflation control, rural development, and primary industries. Market optimism was driven by expectations she would pursue loose monetary policies similar to those of her mentor, former premier Shinzo Abe, though she has tempered some of her fiscal expansion plans amid rising inflation and bond yields. The surge in Japanese equities contrasted with mixed results across other Asian markets and a decline in Paris due to political instability in France. Analysts noted the likely return of the "Takaichi trade," characterized by higher equity prices (except banks), yen depreciation, and increased yields on long-term Japanese bonds, reflecting concerns about Japan's growing debt under her leadership. Meanwhile, global markets were also buoyed by expectations of a Federal Reserve interest rate cut, supporting risk assets like the S&P 500, Dow, bitcoin, and gold.