Japan's 'Takaichi trade' kicks off…Nikkei breaks 49,000 for the first time

Nominated as next prime minister on the 21st

When Sanae Takaichi, party leader of Japan's Liberal Democratic Party (LDP), who supports fiscal expansion policies, became certain to assume the next prime minister post by forming a coalition with the second-largest opposition party, the Japan Innovation Party, the Tokyo market surged on the 20th. This was the so-called 'Takaichi trading.' The vote to nominate the next prime minister will be held in parliament on the 21st.

On that day the Nikkei225 index closed at 49,185, up 3.37%, surpassing 49,000 for the first time in history and bringing the 50,000 level within sight. The surge in the Nikkei index was due to the LDP and the Japan Innovation Party having effectively agreed to form a coalition government, making Takaichi's election as prime minister at the vote expected to be held in parliament on the 21st appear certain.

Takaichi has supported 'Abenomics,' the economic policy of former Prime Minister Shinzo Abe characterized by monetary easing, and during the LDP leadership race she emphasized that she would pursue an active fiscal expansion policy.

The Nihon Keizai Shimbun described the market that day as a 're-acceleration of the Takaichi trade,' explaining, "The increased likelihood of Takaichi being elected prime minister and the easing of political uncertainty have led to an improvement in investor sentiment." It added, "With the Nikkei index within striking distance of the 50,000 level, it is approaching brokerage firms' upper forecast limits."

Mansu Choi reporter bebop@hankyung.com