Global investors sat up and took notice on Monday as Japan’s markets surged higher.
The Nikkei 225 leapt 4.5% to record territory and the yen tumbled below the symbolic 150 to the US dollar mark after Sanae Takaichi’s victory in the ruling Liberal Democratic Party’s (LDP) leadership race, setting her on course to become Japan’s first female prime minister.
The reaction was immediate and emphatic. It wasn’t just a Tokyo story; it was a global one. Capital shifted, sentiment flipped and traders began recalibrating their view of Asia’s economic future. The message is unmistakable: Japan is back in play.
Takaichi’s win has triggered what the markets are calling the “Takaichi trade” — the belief that her administration will inject new energy into fiscal spending, maintain pressure on the Bank of Japan to stay dovish and push forward a sweeping industrial revival.
The surge in equities and the slide in the yen were the clearest signals yet that the world’s third-largest economy is being reappraised.
Industrial and defense-linked shares led Monday’s rally. Yaskawa Electric soared over 20%, Japan Steel Works climbed 14%, and Mitsubishi Heavy Industries gained 13%. These are statements of confidence in sectors expected to benefit from stronger state investment and a more strategic approach to growth.
After years of ultra-low inflation and subdued wages, the country has quietly reached a turning point. Takaichi inherits an economy that has finally shaken off deflation’s grip but remains short of self-sustaining momentum.
Her response looks set to be bold: more public spending, more partnership with industry and a deeper connection between economic growth and national resilience.
This marks a decisive return to industrial strategy; it’s a playbook that many of the world’s leading economies are dusting off. The United States has its Inflation Reduction Act. Europe has its Green Deal and defense reinvestment drive.
Japan’s version will likely be anchored in manufacturing, energy security and technological sovereignty.
For those observing from abroad, Japan’s resurgence matters because it fits into a wider global realignment. Nations are competing not just through productivity, but through purpose; investing strategically in the industries that define the next era of economic power.
The world, it would seem, is entering an age of deliberate growth rather than laissez-faire drift. The yen’s sharp fall is part of that adjustment. It reflects expectations that the Bank of Japan will keep liquidity abundant while fiscal stimulus accelerates.
A weaker currency, while politically sensitive, can help revitalise Japan’s export engine and reassert its global competitiveness in high-value sectors such as semiconductors, robotics and automotive technology.
Bond markets are also responding. Long-dated yields climbed as traders priced in heavier spending, steepening Japan’s yield curve — an early sign that the economy is moving away from the stagnation that once defined it. The sense of motion, after decades of policy fatigue, is almost as significant as the moves themselves.
But what truly sets this moment apart is its geopolitical dimension. Takaichi is widely expected to pursue closer strategic and economic alignment with the United States — not just in defense, but in energy, cybersecurity and advanced manufacturing.
That shared focus on resilience and security could shape the regional economy for decades. It also positions Japan as a key pillar of stability at a time of growing global fragmentation.
There’s a broader confidence at play here. Japan is signalling that it wants to lead again. Its companies are stronger, its corporate governance has improved and its policymakers appear determined to channel investment into future-defining industries. That combination of fiscal intent and institutional reform is a potent one.
For too long, global markets treated Japan as a low-yield, low-growth backwater — reliable, but uninspiring. That perception is changing fast.
What we’re now seeing is a mature economy rediscovering its ambition. The reaction in global capital markets reflects recognition that Japan’s direction has changed.
The scale of the challenge shouldn’t be underestimated. Debt levels remain high, demographics are in decline and the delicate balance between inflation and stability will test the skills of policymakers.
Yet Japan has faced structural headwinds before — and has an unmatched record of technological ingenuity and export discipline. The difference this time is political will.
Takaichi brings ideological clarity, a willingness to use fiscal tools aggressively and an intent to bind economic strength to national security. That combination can be transformative.
The surge in equities and the weakening of the yen are only the opening signals of that shift. What follows could be a longer period of industrial renewal and policy-driven growth that repositions Japan at the heart of Asia’s economic architecture.
The market moves reflect conviction that Japan is ready to lead with confidence — to spend, to build and to compete. The ‘Takaichi trade’ is shorthand for a broader story: the return of Japan as a force not just in markets, but in shaping the future of global growth.
