Sanae Takaichi was elected leader of Japan’s ruling Liberal Democratic Party on October 4, 2025, triggering a dramatic rally in Japanese stocks. The Nikkei 225 index surged 4.8 percent on October 6, while the yen weakened past 150 to the dollar [1][2]. However, her path to becoming Japan’s first female prime minister faces significant uncertainty after the coalition partner Komeito withdrew on October 10 [3].
Market Reaction to Party Leadership
Japanese stock markets responded enthusiastically to Takaichi’s election as LDP leader. The Nikkei 225 jumped 4.8 percent and the broader Topix index rose 3.1 percent on Monday, October 6, with the Nikkei briefly surpassing 46,000 points [1][4]. Major brokerages including Nomura Securities and Daiwa Securities raised their year end targets for the index by at least 10 percent [5].
Currency and Sector Movements
The Japanese yen weakened sharply, falling past 150 against the US dollar and declining against the euro [2][4]. Key gainers included technology stocks, consumer discretionary companies, heavy machinery manufacturers, and real estate sectors. The weaker yen is expected to boost export competitiveness but may increase inflationary pressures [6].
Takaichi’s Economic Policy Agenda
Takaichi is considered a fiscal dove who advocates pro spending economic policies reminiscent of former Prime Minister Shinzo Abe, under whom she served. Her proposed agenda includes increased government subsidies for local governments, eliminating extra gasoline taxes, and reducing diesel fuel costs [7][8]. She has pledged to maintain low interest rates and opposes immediate rate hikes by the Bank of Japan.
Key Policy Priorities
- Increased government spending to stimulate economic growth
- Support for manufacturing sectors and food security
- Investments in artificial intelligence and nuclear energy technology
- Maintaining accommodative monetary policy and low borrowing costs
Political Uncertainty Clouds Leadership Path
Takaichi’s bid to become prime minister became complicated on October 10 when Komeito, the junior coalition partner, announced its withdrawal from the 26 year alliance with the LDP [3][9]. Komeito leader Tetsuo Saito cited inadequate response to a political funding scandal that has plagued the ruling party. The party confirmed it would not support Takaichi in the parliamentary vote scheduled for mid October.
If the three major opposition parties unite behind a single candidate, their combined votes could exceed LDP seats in the lower house, potentially blocking Takaichi’s premiership [9][10]. A parliamentary confirmation vote is expected around October 15, where Takaichi will need to secure a simple majority to become Japan’s first female prime minister.
