Japan Stocks Rise Sharply After Takaichi Elected as Ruling Party Leader — Update

By Kosaku Narioka

Japanese stocks rose sharply after fiscal expansionist Sanae Takaichi won the leadership election of Japan's ruling party, raising hopes for more aggressive government spending to support the economy.

The benchmark Nikkei Stock Average was recently 4.5% higher at 47835.36 on Monday. Heavy-machinery, electronics and auto stocks led gains. Mitsubishi Heavy Industries surged 13%, Sony Group soared 9.4% and Toyota Motor advanced 5.2%.

Among other priorities, Takaichi favors government spending to reinforce Japan's manufacturing economy and food security, and investing in nuclear energy, artificial intelligence and other high-tech sectors.

Takaichi, 64 years old, was elected leader of the ruling Liberal Democratic Party on Saturday, in a party poll after the resignation of her predecessor, Shigeru Ishiba.

Takaichi's election as the LDP's leader will generate plenty of noise, but the key question is what kind of leader she will be, said Stefan Angrick at Moody's Analytics. She has previously made unorthodox economic proposals, and some fear she may ramp up spending without addressing macroeconomic issues.

But Angrick said it is premature to assume so, adding that "the trajectory of Japan's economy will hinge on whether Takaichi's premiership is guided more by pragmatism or ideology."

In other markets, the yen weakened sharply and short-term government bond yields dropped, reflecting the view that the Bank of Japan will be slower in raising rates, while superlong yields rose in anticipation of fiscal expansion.

"Takaichi is seen as supportive of easy fiscal and monetary policy," National Australia Bank's Taylor Nugent said in commentary. Expectations for a BOJ rate increase in October thus could be pared, the senior economist added.

The yen was recently trading at 149.89 to the dollar, compared with 147.45 as of late Friday in New York. The two-year government bond yield was down 4 basis points at 0.900%, while the 30-year yield was 13 basis points higher at 3.280%.

Barclays chief Japan economist Naohiko Baba said the possibility of another BOJ rate increase this year has fallen and that a rate increase at its meeting in January "seems the most reasonable at this point." Takaichi has said a shift to wage growth-driven inflation is necessary, and Baba expects the momentum of wage negotiations between unions and management for the next fiscal year can be largely assessed by then.

Despite the yen's falls on Monday, Takaichi's pledge to boost investment in areas, including artificial intelligence and semiconductors, will likely help boost Japan's potential growth and eventually raise the value of the yen, Sony Financial analyst Maki Ogawa said. "What's important is how quickly Ms. Takaichi implements her campaign promises," she said.

--Ronnie Harui and Megumi Fujikawa contributed to this report

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

October 06, 2025 00:03 ET (04:03 GMT)