While I am on paternity leave I leveraged Google NotebookLM to summarize both excellent articles into a video/podcast. The gist is to still go to Japan to take advantage of the currency exchange and get your Rolex for a discount and duty free. But I highly recommend you read both sources: * Excellent and actionable analysis by Bill Cara * Japan’s Iron Lady By Michael Fritzell https://www.asiancenturystocks.com/japans-iron-lady Executive Summary The election of Sanae Takaichi as the new leader of Japan's ruling Liberal Democratic Party (LDP) is set to install her as the nation's first female Prime Minister by the end of October 2025. This development has catalyzed a significant and immediate reaction in Japanese financial markets, with the Nikkei 225 surging to an all-time high in a rally dubbed the “Takaichi Trade.” Takaichi, a conservative politician and close ally of the late Shinzo Abe, is expected to revive and continue his "Abenomics" program, characterized by aggressive monetary easing, substantial fiscal stimulus, and structural corporate reforms. Her economic platform, "Sanaenomics," signals a dovish monetary policy, with Takaichi being openly critical of interest rate hikes, and a robust fiscal stimulus plan that includes cuts to income, consumption, and gasoline taxes. Geopolitically, she is a hardliner, advocating for increased defense spending beyond the current 2.0% of GDP target, a revision of Japan's pacifist constitution, and a reduction in economic dependence on China. The market has priced in these policies, resulting in a sharp weakening of the Japanese Yen past ¥150/USD and a spike in long-term government bond yields to a 17-year high. This environment is seen as fundamentally bullish for Japanese equities, particularly for exporters benefiting from the weaker currency, as well as the defense, nuclear energy, and high-tech manufacturing sectors, which align with her stated policy priorities. While her corporate reform agenda, including a potential "cash deposit tax," is viewed as positive for stocks, her hawkish foreign policy and conservative social views present potential challenges for Japan's international relations and domestic labor market. The Political Transition: Takaichi's Rise to Power On September 7, 2025, Prime Minister Shigeru Ishiba announced his intention to resign, triggering a leadership election within the ruling Liberal Democratic Party (LDP). The race featured five candidates, with the primary contest between Shinjiro Koizumi, the Minister of Agriculture and son of a former reformist prime minister, and Sanae Takaichi, the former Minister of Economic Security and a prominent member of the LDP's conservative faction. In a tight race, neither front-runner secured a majority in the first round. However, with the backing of veteran politician Aso Taro and widespread support from rank-and-file members, Takaichi ultimately secured victory with 185 votes to Koizumi's 156. She demonstrated broad appeal by finishing first or second in 36 of the 47 prefectural chapters. Upon winning, Takaichi declared her commitment to "Work, work, work, work, work... for the sake of Japan and to rebuild the LDP." Her administration is expected to be staffed by members of the Abe faction, such as Hagiuda Kōichi and Nishimura Yasutoshi, who are affiliated with the ultranationalist organization Nippon Kaigi. As the LDP does not hold a majority in parliament, Takaichi will need to form a coalition. The most likely partner is the Democratic Party For the People (DPFP), which shares similar views on fiscal spending, nuclear power, and geopolitical hawkishness. This alignment may strain the LDP's long-standing partnership with the more socially liberal Komeito party, potentially sidelining policies related to healthcare, education, and higher minimum wages. Profile of the Prime Minister-Elect Biographical Background Sanae Takaichi was born in Nara, Japan. An academically gifted student, she was accepted to both Waseda and Keio Universities but, lacking parental financial support, attended Kobe University, commuting six hours daily. She later trained at the Matsushita Institute's public policy program and worked on Capitol Hill for Democratic US Representative Pat Schroeder in the 1980s. She won her first Diet seat in 1993, the same year as Shinzo Abe, with whom she formed a close political alliance. This relationship led to her appointments as Minister of Internal Affairs & Communication (2014-2017 and 2019-2020) and Minister for Economic Security (2022-2024). Personal and Political Identity Takaichi is described as a "voracious reader with great attention to detail" who is "not natural at socializing." Her personal interests are unconventional for a Japanese politician; she is a "motorhead" who owns a 1991 Toyota Supra sports car and played drums in a heavy metal band during university, known for breaking drumsticks while playing Deep Purple's "Burn." Politically, she is a staunch conservative, often compared to Margaret Thatcher, whose memoirs are her favorite book, earning her the moniker "Japan's Iron Lady." Her conservative social views include opposition to allowing women to retain their maiden names after marriage and opposition to same-sex marriage, which she believes could break traditional family structures. She has also attracted controversy for visiting the Yasukuni Shrine, which honors war criminals, and for being photographed with the author of a book about Hitler's election strategy, though she did not explicitly promote the book. "Sanaenomics": The Economic and Geopolitical Agenda Takaichi has publicly stated she will "carry on his will," referring to Shinzo Abe, indicating a clear continuation of the "Abenomics" framework. This platform, which can be termed "Sanaenomics," rests on three core pillars. 1. Aggressive Monetary Easing Takaichi is a firm advocate for a dovish monetary policy. She has been critical of the Bank of Japan (BOJ), stating last year that it was "stupid [for BOJ] to raise interest rates now," arguing that hikes would harm household finances. Her leadership is expected to pressure the BOJ to maintain loose monetary conditions. 2. Substantial Fiscal Stimulus Takaichi has signaled a willingness to use all available fiscal tools to spur growth, proclaiming, "If elected I will turn on ALL switches available, ALL at once, to drive growth of Japan." Her plans include lowering income, consumption, and gasoline taxes, which is expected to increase Japan's budget deficit from its current 2.3% of GDP. 3. Structural and Geopolitical Reforms * Corporate Reform: She intends to push Abe's corporate reform agenda further. She has proposed a "cash deposit tax" to compel companies to either reinvest or pay out excess cash on their balance sheets and has argued for revising the Corporate Governance Code to demand more clarity on the use of retained earnings. * Geopolitics and Defense: Takaichi is a hardliner on foreign policy, particularly towards China. She supports reducing Japan's economic dependence on China and building alliances with other democracies. This stance translates to a push for greater defense spending, aiming to surpass the current 2.0% of GDP target. She also seeks to revise Japan's pacifist constitution, Article 9, to enable the country to declare war and export arms. * International Relations: Takaichi reportedly has a strong relationship with Donald Trump. Her hawkish posture, however, particularly her visits to the Yasukuni Shrine, may complicate efforts to build alliances with nations like South Korea. Market Impact: The "Takaichi Trade" Takaichi's election victory immediately triggered a powerful market rally, with investors moving to price in her pro-growth, inflationary policies. Market Indicator Pre-Election Level Post-Election Level Change/Commentary Nikkei 225 Index - - Surged +4.0% immediately after the win; on Oct 6, 2025, it rose +4.75% to a new all-time high. JPY/USD Exchange Rate 147 >150 The Yen weakened sharply, viewed as a positive for exporters. 30-Year JGB Yield 3.15% 3.30% Long-term bond yields spiked to a 17-year high on expectations of higher inflation and debt issuance. This market phenomenon, dubbed the “Takaichi Trade,” is characterized by euphoria around cyclicals and exporters. According to Saxo's Chief Investment Strategist, Charu Chanana, "With policy unlikely to shift soon, the yen stays under pressure... It remains the go-to funding currency in global markets." Proprietary INSTAT analysis confirms the market's bullish momentum, showing exceptionally high Short-Term Trend (ST) and Institutional Demand (IN) scores across numerous stocks, indicating concentrated buying interest. Sector-Specific Outlook Sector Outlook & Rationale Key Companies Mentioned Exporters Bullish. A weaker Yen directly boosts the competitiveness and overseas earnings of Japanese exporters, particularly in the automotive and electronics industries. Toyota, Honda, Nissan, Subaru, Koito Manufacturing, AeroEdge, Kansai Paint, Sony. Defense Bullish. Takaichi's commitment to raising defense spending and potentially exporting arms will directly benefit defense contractors. Mitsubishi Heavy Industries, Kawasaki Heavy Industries. Energy (Nuclear) Bullish. Takaichi is a strong proponent of nuclear power, supporting faster reactor restarts and next-generation technologies. She is skeptical of solar and offshore wind. Kansai Electric Power. Construction & High-Tech Bullish. Her agenda includes "wise spending" on infrastructure and building "national champions" in strategic industries like semiconductors, AI, and batteries. FANUC, Fujitsu Ltd., Mitsubishi Heavy Industries. Tourism Mixed. The weak Yen is a major draw for international tourists. However, her hawkish stance toward China could deter Chinese tourists (23% of arrivals), and conservative immigration views could worsen labor shortages in the service industry. Kyushu Railway, Ichigo Hotel REIT. Chin
