A woman, not a business, has just been crowned the new favorite in Japan’s markets. After conservative Sanae Takaichi assumed leadership of the ruling Liberal Democratic Party on Monday, paving the way for her to become Japan’s first female prime minister, stocks reached all-time highs.
As investors anticipate that Takaichi will double down on the “Abenomics” strategy, the Nikkei 225 jumped by almost 5% and crossed 47,000 for the first time in its history. The pro-business ideology, developed by former Prime Minister Shinzo Abe, advocates for low interest rates and substantial economic stimulation.
In order to prevent the Bank of Japan from raising interest rates too soon, traders are placing bets that Takaichi will encourage significant spending. On Monday, the possibility of cheap money and government funding boosted stocks, but it also caused the yen’s value to decline. The currency sank about 2% against the dollar and to a record low against the euro, a well-known result of Japan’s consistently loose monetary policy.
Riding high on expectations that a weaker yen would increase foreign revenues, exporters, real estate companies, and defense contractors gained. A weakened yen has mixed benefits for Japan. It lowers export prices overseas, benefiting the tourism industry as well as manufacturers of technology, machinery, and automobiles.
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