Japan made history this week as Sanae Takaichi became the nation’s first female Prime Minister, lifting market sentiment and pushing the Nikkei 225 to new highs.
Japan entered a new political chapter this week as Sanae Takaichi was elected the nation’s first female Prime Minister, a move that immediately lifted investor sentiment, strengthened the country’s equity markets and placed a renewed focus on the yen.
Nikkei 225 Surges on Market Optimism
Financial markets responded swiftly to the election result and the Nikkei 225 surged nearly 3 per cent in early Monday trading, hitting fresh record highs. Investors may have been encouraged by expectations that Takaichi’s administration has promised to prioritise economic stimulus, business confidence and market stability.
The rally extended across Asia, with risk appetite improving in Hong Kong, Seoul, and Sydney. In Tokyo, financials, technology and consumer shares led the gains, including major names such as Mitsubishi UFJ Financial Group, Tokyo Electron, Sony Group and Fast Retailing, as investors bet on renewed fiscal support and business-friendly reforms under Takaichi’s new leadership.
Yen Weakens as Traders Anticipate Policy Continuity
Whilst equities climbed, the Japanese yen weakened slightly, reflecting market confidence that Takaichi’s government will maintain a pro-growth, accommodative policy stance. The move comes as investors expect continuity from the Bank of Japan, which has recently signalled caution about tightening monetary policy too quickly.
By mid-session, USD/JPY was hovering near ¥150.50, marking a modest decline for the yen. Analysts have noted that short-term currency tends to weaken after periods of political transition, particularly when investors anticipate fiscal support or expanded government spending.
A Milestone for Japan
Beyond markets, Takaichi’s appointment represents a historic and symbolic moment for Japan’s political landscape. A long-time member of the ruling Liberal Democratic Party (LDP), Takaichi is known for her conservative credentials and close ties to former Prime Minister Shinzo Abe. Takaichi’s leadership is expected to blend fiscal pragmatism with efforts to enhance Japan’s global competitiveness. Early remarks from her office have suggested an emphasis will be placed upon innovation, energy security and structural reforms aimed at supporting both domestic growth and Japan’s regional influence.
Regional Markets React Positively
The ripple effects extended beyond Japan’s borders. Asian equity indices rose broadly and China’s Shanghai Composite as well as South Korea’s KOSPI posted small gains amid an improved sentiment.
Traders described the election as a “confidence reset” for Japan, reinforcing the view that political stability in Asia’s second-largest economy could help support regional recovery amidst global uncertainty. The key question now is how Takaichi’s administration will balance monetary caution with fiscal ambition. With inflation pressures still subdued and growth uneven, investors will be watching closely for her government’s first budget proposals and any signals on potential cooperation with the Bank of Japan.
New to forex trading? Learn more in our complete guide to Forex Trading for Beginners.
