A Nikkei poll published Thursday projects that Prime Minister Takaichi’s LDP-JIP coalition will capture more than 300 of the 465 lower house seats in Sunday’s election, with some estimates extending toward the 310-seat supermajority threshold. The poll confirms what equity markets have been pricing since parliament was dissolved on January 23: a decisive mandate that would give Takaichi unchecked legislative authority on fiscal, defense, and potentially constitutional policy. The Nikkei 225, which has already rallied to successive record highs in anticipation of this outcome, continues to attract foreign buying as higher JGB yields draw fixed-income investors into the Japanese market alongside the equity flows.
Nikkei Asia reported that higher yields are attracting more foreign investors ahead of the key election, a dynamic that reinforces the “Takaichi trade” across multiple asset classes simultaneously. The 30-year JGB yield, which hit a record 3.88% before the dissolution, reflects the market’s assessment that Takaichi’s fiscal expansion will increase government borrowing at a pace that demands higher term premium. For international bond investors, Japan’s long-dated sovereigns now offer yields that compete with peripheral European debt, creating an entry point that was unthinkable during the yield curve control era. The equity market, meanwhile, benefits from the same fiscal impulse: government spending on defense, infrastructure, and AI investment feeds directly into corporate revenue for the sectors aligned with Takaichi’s agenda.
The KOSPI has maintained its momentum alongside the Japanese rally, trading near 4,723 as Samsung and SK Hynix continue to benefit from the AI-driven memory cycle. Bank of America noted in a Tuesday research note that overseas investors tend to buy Japanese stocks around lower house elections and that large-cap, high-ROE, and high-beta names tend to outperform during these periods. The historical pattern suggests that foreign fund flows into Japan typically accelerate in the weeks immediately following a decisive election outcome, as political uncertainty is resolved and capital can be deployed with greater confidence in the policy outlook.
The yen has weakened past 159 to the dollar, its lowest since mid-2024 when Japanese authorities intervened with approximately $62 billion to arrest the currency’s slide. Finance Minister Katayama’s warnings about “decisive action” against excessive yen depreciation remain in effect, but the market views intervention as unlikely during the election campaign. The 158-160 zone in dollar-yen represents a region of elevated but manageable risk for currency traders, with the post-election BOJ meeting in March likely to be the next decisive inflection point. A Takaichi supermajority would reinforce the weak-yen, strong-equity dynamic that has defined the current rally.
The opposition Centrist Reform Alliance, formed through the merger of the Constitutional Democratic Party and Komeito, may lose half of its previously held 167 seats according to the Nikkei poll. The opposition’s inability to present a unified fiscal alternative has allowed the “Takaichi trade” to proceed without meaningful resistance from the political risk that a competitive election would normally introduce. For investors, this reduces the asymmetry of the election bet: the upside from a strong win is largely priced, while the downside from a disappointing result, though unlikely, would trigger a more significant repricing given the degree of positioning already in place.
The regional context is supportive. U.S. President Trump’s endorsement of Takaichi via Truth Social, the planned March 19 White House summit, and the alignment between Washington and Tokyo on defense and trade policy all reinforce the structural case for Japanese equities under Takaichi’s leadership. Gold has risen above $5,000, signaling broader safe-haven demand, while oil remains relatively contained near $63, providing a favorable input cost environment for Asian manufacturers. The election on Sunday will either confirm the market’s thesis or expose the concentrated positioning that months of anticipation have created. The former outcome is expected; the latter, while improbable, would produce volatility disproportionate to the political shift involved.
