Takaichi Victory Sparks Market Volatility as Japan Eyes ‘Neo-Abenomics’

Japan’s incoming Prime Minister, Sanae Takaichi

Takaichi Victory Sparks Market Volatility as Japan Eyes ‘Neo-Abenomics’

By Paul V. Young – TheNationWeek.com | October 7, 2025

TOKYO, Japan – The election of Sanae Takaichi as leader of Japan’s Liberal Democratic Party (LDP) has sent ripples through financial markets, signaling a potential return to aggressive economic stimulus policies.

Takaichi, set to become Japan’s first woman prime minister, is a staunch advocate of the late Shinzo Abe’s “Abenomics,” sparking speculation about a “neo-Abenomics” approach.

The news triggered immediate market reactions.

The yen weakened sharply against the dollar, briefly surpassing 150, while the Nikkei 225 stock index surged nearly 5 percent.

Investors are betting that Takaichi’s likely continuation of low interest rates and increased government

spending will boost the competitiveness of Japanese exports, benefiting major companies like Toyota Motor.

Takaichi’s victory over Shinjiro Koizumi, who favored curtailing government spending, further fueled market enthusiasm.

Her commitment to increased state spending, particularly in areas like artificial intelligence and semiconductors, aligns with a growth plan focused on stimulating incomes, consumption, and investment.

As a defense hawk, she also supports increased military spending.

However, Takaichi’s past criticisms of the Bank of Japan’s (BOJ) rate hikes contrast with the central bank’s recent messaging.

While BOJ Governor Kazuo Ueda has indicated a gradual increase in interest rates, Takaichi’s election has led market participants to believe that the BOJ may delay further rate hikes, potentially waiting to assess her policy direction.

Despite softening her stance on interest rates during her campaign, Takaichi emphasized the need for the government and the BOJ to move in “lockstep.”

She also stated she would not renegotiate the existing trade deal with the United States, despite earlier expressing interest in doing so.

The market’s response suggests a belief that Takaichi’s policies could provide a short-term boost to the Japanese economy.

But the long-term implications of a return to large-scale government spending and ultra-low interest rates remain to be seen.