Japanese stocks and bond yields surged on Monday, while the yen fell, after Sanae Takaichi won the leadership election of the ruling Liberal Democratic Party. Takaichi, who is expected to become Japan’s first female prime minister later this month, has previously backed aggressive monetary easing and increased government spending, echoing the policies of former premier Shinzo Abe. Although she softened her “Abenomics” stance during the campaign, her victory has raised concerns about the impact on Japan’s economy, especially regarding inflation and the nation’s already massive debt.
The Nikkei 225 index jumped more than 4 % in morning trade, and the yen hit a new record low against the euro. Yields on 30‑year Japanese bonds also rose sharply, reflecting fears that debt—now over 200 % of GDP—could continue to grow under Takaichi’s leadership. Bloomberg economist Taro Kimura said Takaichi appears more inclined to stimulate the economy than her predecessors, but she will need to balance that approach with current realities to avoid worsening the cost‑of‑living squeeze and disrupting the rate market.
The Bank of Japan, which began raising interest rates from below zero last year, may resume its rate hikes this month despite Takaichi’s appointment, according to Marcel Thieliant of Capital Economics. Takaichi’s immediate challenge is to secure the support of at least one opposition party to form a working majority in parliament. She must also address Japan’s economic competitiveness, strengthen its technological and industrial base, and mitigate the effects of an aging and declining population.
As an arch‑conservative and China hawk, Takaichi’s leadership is expected to have significant implications for Japan’s economic and foreign policies. One of her first official duties as premier will be to receive U.S. President Donald Trump during his scheduled visit to Japan in late October. Takaichi has said she has no plans to overturn the recent trade deal between Tokyo and Washington, despite ongoing questions about the agreement.
With her victory, Takaichi becomes head of the Liberal Democratic Party, which has governed Japan almost continuously since 1955. Her task will be to restore the party’s fortunes, which have been dented by voter anger over inflation and a recent scandal.
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