The “Takaichi Trade”: How Japan’s First Female PM Is Shaping the Yen

Having assumed office late in 2025 after Shigeru Ishiba quit, Sanae Takaichi has concentrated power with a landslide Liberal Democratic Party victory and a supermajority in the snap election set for February 2026. Having supported Abenomics-style policies as Japan's first female prime minister and clearly given aggressive fiscal stimulus priority over fast monetary tightening. Though encouraging of growth and equities, this combination of measures has turned to be a primary cause of yen weakness.

Under Takaichi, huge expenditure plans have been approved—including a roughly ¥21 trillion stimulus in 2025 and more measures totaling over ¥13.9 trillion—covering tax cuts and child payouts. These actions have increased market concerns about Japan's already-strained debt-to-GDP ratio, prompting investors to sell Japanese Government Bonds and the yen even as equities surge under the so‑called “Takaichi trade.” With inflation above 2%, the Bank of Japan has stayed conservative on rate rises, which strengthens a weaker yen background as Takaichi's influence is seen as a major cause for the BOJ's delayed policy normalization.

USD/JPY has wandered toward the 157 zone in markets, with post-election yen gains rapidly reversing as fiscal concerns took front stage. Under Finance Minister Katayama, the Ministry of Finance is closely monitoring the 157–158 region, suggesting possible intervention should volatility rise, therefore limiting severe movements. For traders, BOJ policy meetings, fresh fiscal bills, and any indications of coordinated interference are the major catalysts to watch as these events will probably determine whether USD/JPY rises farther above 155 or experiences quick corrective swings of yen strength.