The “Takaichi Trade”: Markets Bet on a Return to Abenomics Under Japan’s New Prime Minister

The “Takaichi Trade”

Tokyo Japan

The “Takaichi Trade” Explained

Global markets have already coined a new phrase called the “Takaichi Trade.” It refers to the market reaction following the election of Japan’s new Prime Minister, Sanae Takaichi, who is widely seen as a supporter of former leader Shinzō Abe’s economic strategy known as Abenomics.

While it’s still unclear how closely Takaichi will follow Abe’s playbook, traders have wasted no time expressing their views by buying Japanese stocks, selling the yen (JPY), and selling bonds. The move reflects expectations of policies favoring growth, stimulus, and a weaker yen, all hallmarks of the Abenomics era. (NEWSQUAWK PREVIEW: Japanese LDP Leadership Election, 4th October 2025)

Tokyo Japan

What Is Abenomics?

Abenomics refers to the economic policy framework introduced by former Prime Minister Shinzō Abe in 2012. Its goal was to revive Japan’s sluggish economy, which had suffered decades of deflation and weak growth. Abe’s strategy foicused on three parts:

1. Monetary Easing – The Bank of Japan (BoJ) massively expanded the money supply, driving down interest rates and weakening the yen to support exports.

2. Fiscal Stimulus – Increased government spending on infrastructure and domestic projects aimed to boost demand and create jobs.

3. Structural Reforms – Reforms in labor markets, trade, and corporate governance were intended to increase long-term productivity and competitiveness.

The Challenge for Takaichi

Times have changed. Japan is no longer in deflation — consumer prices are rising 2.7% year-over-year, while core CPI (excluding fresh food) is up 3.5%. The IMF forecasts Japan’s 2025 GDP growth at just 0.6%, reflecting a fragile recovery amid global uncertainty.

The Bank of Japan, after years of ultra-loose policy, has begun raising interest rates, a sharp departure from the Abenomics era. This creates a potential policy clash. Will Takaichi push for renewed stimulus, or respect the BoJ’s efforts to normalize policy?

Global Pressures and Political Risks

The return of Trump’s tariffs adds another layer of uncertainty. Japan’s export-driven economy could face headwinds if U.S. trade barriers rise again. Moreover, any aggressive attempt by Tokyo to weaken the yen could draw sharp criticism from Washington, just as it did in past cycles.

Market Reaction: Cautious Optimism

The immediate reaction to Takaichi’s victory shows markets are betting on continuity rather than change:

• JPY fell sharply, signaling expectations of looser monetary to support exports.
• Japanese government bonds sold off, pushing yields higher.
• The Nikkei surged to record highs, as investors priced in renewed economic support.

USDJPY 1 HOUR CHART (opening week gap)

However, politically driven market moves can be short-lived and volatile. The next phase will depend on how Takaichi defines her version of Abenomics and whether she leans toward monetary and fiscal expansion or focuses on structural reform.

Bottom Line, the “Takaichi Trade” captures the market’s early enthusiasm for a potential return to pro-growth, yen-weakening policies. But with inflation above target, the BoJ tightening, and global trade tensions rising, the new prime minister faces a delicate balancing act.
For traders, that means one thing: watch the headlines! The degree to which Takaichi revives Abenomics could determine the next big move in JPY, Japanese stocks, and bonds.

Read more on Asahi Shimbun

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