On October 6, 2025, following the ruling Liberal Democratic Party's election of a new leader on October 4, Japanese stocks surged significantly, with the Nikkei Index soaring over 4% to a record high, while the yen experienced a sharp decline. The news highlights the election of Sanae Takaichi, a fiscal and monetary policy dove, as party leader, positioning her to become Japan's first female prime minister.

　　The Nikkei Index rose 4.3% within the first 15 minutes of trading, reaching an unprecedented 47,734.04 points. Takaichi defeated the more moderate Nobuo Kishi in the party's leadership election on Saturday, fueling market expectations for fiscal stimulus policies.

　　The yen fell 1.6% against the U.S. dollar, approaching the key level of 150 yen per dollar. Short-term Japanese government bond yields dropped to a two-week low, as traders reduced bets on the Bank of Japan (BOJ) raising interest rates by the end of the year. The market-implied probability of a rate hike by year-end fell from 68% on Friday to 41%.

　　A year ago, Takaichi criticized the Bank of Japan's decision to raise interest rates as "foolish," but she has recently adopted more restrained rhetoric, stating only that central bank policies should align with the government. Economists at Morgan Stanley MUFG Securities noted in a research report that concerns among some investors about the new government potentially pursuing extreme fiscal expansion or exerting political pressure on the Bank of Japan are exaggerated. Takaichi's stance appears highly consistent with the cautious approach of BOJ Governor Kazuo Ueda toward policy normalization.