Japan Stocks Hit All-Time High as Investors Bet on Takaichi's Spending Spree

¥38,500. That's where Japan's Nikkei average closed today—an all-time high. It's been climbing for two straight days since Prime Minister Sanae Takaichi's crushing election victory. The message from investors is crystal clear: "Japan is back."

The 30-Year Political Breakthrough Markets Have Been Waiting For

The election wasn't just a win—it was a statement. Takaichi's Liberal Democratic Party secured a two-thirds supermajority, the strongest political foundation any Japanese leader has enjoyed in three decades. And she's making history as Japan's first female prime minister to wield such power.

Markets responded instantly. The Nikkei surged 2.8%, while foreign investors poured a staggering ¥1.2 trillion into Japanese stocks. Goldman Sachs didn't waste time, bumping their Nikkei target to ¥42,000.

"This is the political stability Japan has been missing for a generation," said Jonathan Garner, Morgan Stanley's Asia strategy chief.

Abenomics 2.0: Same Recipe, Different Kitchen

Takaichi's playbook looks familiar—massive fiscal spending on key industries, government intervention to boost real wages, and headline-grabbing moves like suspending food taxes. It's essentially Abenomics redux.

But here's what's different: the political math. Unlike former PM Abe, who faced constant opposition pushback, Takaichi can ram through policies with minimal resistance. The opposition is effectively neutered.

The question isn't whether she can implement her agenda—it's whether it'll work this time.

Winners, Losers, and the Global Ripple Effect

Japanese exporters are the obvious winners. Toyota, Sony, and SoftBank shares jumped 5-7% on expectations that yen-weakening policies will continue boosting their overseas profits.

But not everyone's celebrating. Critics worry that fiscal expansion will fuel inflation, ultimately hurting ordinary consumers. Japanese 10-year bond yields have already spiked to 0.8%—a warning sign that markets are pricing in higher inflation expectations.

For global investors, Japan suddenly looks attractive again. After decades of stagnation, the combination of political stability and pro-growth policies is drawing capital away from other Asian markets. South Korea's KOSPI fell 1.2% today as funds rotated into Japan.

The Trillion-Dollar Question

Foreign investors are betting big on Takaichi's Japan—$38 trillion in market cap says they believe this time is different. But history suggests caution. Japan has tried fiscal stimulus before, often creating asset bubbles without sustainable growth.