Tokyo equities rallied as Japan’s new leadership took shape.

On October 21 2025, Sanae Takaichi was confirmed as prime minister, becoming the nation’s first woman to lead the government.

Her ascent followed the ruling Liberal Democratic Party forming a new coalition with the Japan Innovation Party after the breakdown of its long-standing partnership with Komeito.

Investor sentiment surged with the news, driving the Nikkei 225 index to its highest closing level ever.

Stocks particularly in consumer and export sectors advanced, as the so-called “Takaichi trade” gained traction.

Market watchers noted that expectations of renewed fiscal stimulus, continued monetary accommodation and a weaker yen were fueling the rally.

Bond markets and currency movements moved in tandem.

Yields on long-dated Japanese government bonds rose, signalling that markets anticipate higher borrowing and fiscal support.

The yen weakened past ¥150 per US dollar, reinforcing the export-earnings thesis for industrial firms.

Takaichi’s economic platform emphasises revitalising growth, promoting investment in advanced industries and maintaining low financing costs.

Her approach signals a continuation and evolution of the “Abenomics” era policies, with a sharper focus on national security, structural reform and domestic resilience.

However, analysts caution that while markets have rallied, key challenges remain: Japan’s aged population, rising inflation and public-debt burden impose constraints on the scale and timing of new stimulus.

As the new Cabinet takes office, attention will centre on policy announcements, fiscal-monetary coordination and the ability to deliver growth in a complex global environment.

The strength of the market reaction underscores investor belief in a new phase of economic activation under Takaichi’s leadership.