Irony as Nikkei Peaks Under Ishiba — Investors Watch Takai’s Sanaenomics Closely

Among LDP supporters, Takaichi ranks third

In the recent House of Councillors election, the LDP suffered a crushing defeat, becoming a minority party in both chambers of the Diet—a humiliating outcome. This marks the third consecutive loss since Shigeru Ishiba (68) became prime minister: last autumn’s House of Representatives election, and June’s Tokyo metropolitan assembly election this year. Within the party, the former Abe faction and others have pushed for an “Ishiba push-out,” calling for an early leadership election.

If a leadership election were held, Takaichi would emerge as a leading candidate. A poll conducted by Jiji Press from August 8–11 asking about the next prime minister showed Takaichi in first place.

However, among LDP supporters, Prime Minister Ishiba topped the poll, followed by Agriculture Minister Shinjiro Koizumi in second place, with Takaichi sinking to third. A Nagatacho insider commented:

“This is a very interesting result. It suggests that LDP supporters are wary of Takaichi, who has an image of being extremely conservative. Before she realized it, Takaichi is no longer at the core of the LDP, but rather seen as a fringe figure.”

Former Osaka Governor Toru Hashimoto implicitly suggested that Takaichi leave the LDP. On a TV program, he said:

“I fully support the LDP splitting. It’s a mess over whether it’s conservative or liberal.”

He continued:

“The point is whether Takaichi is truly prepared to take action. She makes macho statements against China, but if she really has that courage and determination, she should leave the LDP with everyone who shares her ideology, forming a group with either the Sanseitō or the Japan Conservative Party. But Takaichi won’t do that.”

Takaichi strongly rejected this. On August 12, she tweeted:

“Of course, [I won’t do that].”

She added:

“It’s almost like being told that everyone except the so-called hardcore pro-China faction should leave the LDP.”

For Takaichi, who carries on the legacy of the late Prime Minister Shinzo Abe, even raising the idea of leaving the party must be frustrating. At the same time, it is true that some of her strength is starting to fade.

Since August 5, the Nikkei stock market has been soaring. On the 13th, the Nikkei 225 closed at a record high of 43,274 yen, and by the 18th it had reached 43,714 yen, setting consecutive record highs for two trading days following the 15th—an unexpected streak even for market participants.

“Analyzing the situation, there has been a sharp increase in inflows from foreign investors. Japanese companies have long been undervalued. Although there were complications in the tariff negotiations with President Trump, Japan handled them skillfully and secured a commitment to reduce automobile tariffs to 15 percent. That’s a passing grade. Compared to the uncertain U.S. market, foreign investors see the Japanese market as being at an ideal temperature.”

When it comes to economic policy and stock market gains, Takaichi has previously been associated with these topics. When she ran in the 2021 LDP leadership election, she proposed “Sanaenomics,” a play on Abe’s “Abenomics,” advocating financial easing and fiscal stimulus. In last September’s leadership election, her motto was:

“Make Japan the world’s top again,”

emphasizing proactive fiscal policy.

The image of Takaichi = rising stocks, Ishiba = falling stocks

In the runoff election against Ishiba, investors who expected Takaichi to win rushed to buy, causing the Nikkei to surge rapidly. These speculative purchases linked to Takaichi became known as the “Takaichi Trade” or “Takaichi Rally.”

However, if Ishiba were to become Prime Minister in the runoff, the Nikkei plunged 1,910 yen on September 30, the first trading day of the week. The perception of Takaichi = rising stocks, Ishiba = falling stocks had clearly taken hold in the market.

Recent stock performance, though, is exceptionally strong—and notably, it’s happening under the Ishiba administration, which has often been mocked as economically clueless, making the situation doubly surprising. According to a market insider, although some market corrections may occur due to the rapid rise:

“The strong trend is continuing.”

Yet in Nagatacho, the political atmosphere is more skeptical. Political commentator Harumi Arima explains:

“Within Nagatacho, very few people believe this stock surge is thanks to Prime Minister Ishiba. Indeed, efforts by the Ishiba administration, including Akazawa and others, during the Trump tariff negotiations have been somewhat acknowledged. But ultimately, it became clear that Japan’s economy depends on President Trump, regardless of who negotiated. So, while praise is limited, there hasn’t been strong backlash either—people may vaguely say he should resign over the Upper House election loss, but not ‘he must resign.’”

The same market insider notes:

“Lately, the market is actually wary of a ‘Takaichi Rally.’ If aggressive fiscal policy is pursued now, it could accelerate inflation and increase national debt. Foreign investors are highly sensitive to government bond prices, which reflect national debt. So, it’s no longer guaranteed that stocks will rise just because it’s Takaichi.”

If doubts emerge about her signature economic policies, Takaichi could find herself weakened—her path toward becoming Japan’s first female prime minister will remain a tough battle.