Global fund managers are refocusing on Japan’s markets as confidence builds around the country’s new pro-growth government led by Prime Minister Sanae Takaichi, Japan’s first female leader.
🔹 Reflation Revival & Policy Support
Takaichi’s promises of stimulus spending, tax breaks, and continued low interest rates have powered the Nikkei 225 to record highs. Her “reflationist” agenda is drawing comparisons to the early Abenomics era — but with a stronger focus on digital investment and industrial competitiveness.
🔹 Investor Rotation
Foreign investors bought ¥4.36 trillion ($28.9 billion) in Japanese equities in the two weeks through Oct 11 — the largest consecutive inflows since 2005.
With the Nasdaq trading at 34× earnings versus Japan’s 22× P/E, global allocators are finding Japanese assets both cheaper and more diversified amid high U.S. valuations and tariff uncertainty.
🔹 Market Sentiment & Risks
Analysts say the “Takaichi Trade” could mirror elements of the “Trump trade” — favoring stimulus and manufacturing — but warn of policy friction between the ruling LDP and its coalition partner Ishin.
A weakening yen, down ~4% this month, remains a double-edged sword: beneficial for exporters yet challenging for foreign investors.
🔹 Fixed-Income Repositioning
Investors such as First Sentier’s Nigel Foo and Russell Investments’ Van Luu see value in Japanese Government Bonds (JGBs) as repatriation flows increase and relative yields improve versus European bunds.
Overall, Japan’s combination of structural reform, fiscal support, and attractive valuations is reviving global confidence — positioning Tokyo once again as a serious contender for diversified capital deployment in 2025.