Japanese financial markets were jolted into motion this week as Sanae Takaichi secured leadership of the ruling Liberal Democratic Party (LDP), all but confirming her as Japan’s next prime minister. The result triggered a strong rally in equities, a selloff in government bonds, and renewed downward pressure on the yen—signaling that investors are recalibrating expectations for Japan’s economic future under Takaichi’s watch.

With promises of aggressive fiscal expansion, corporate support, and close alignment with the Bank of Japan , Takaichi has struck a bullish chord with equity investors—but her policies may complicate the path for bondholders and currency markets.

A New Economic Direction

Takaichi, a former internal affairs minister and longtime advocate of supply-side economics,

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