Takaichi Trade Surges Amid Rising Speculation Over Japan's Snap Election

The Takaichi Trade, a reference to market positioning linked to the political influence of Sanae Takaichi, has seen renewed momentum as speculation intensifies over a potential snap general election in Japan. Traders are reacting to shifting political signals, particularly within the ruling Liberal Democratic Party, where internal dynamics suggest a possible leadership change could trigger a vote. The Nikkei 225 index rallied 2.8% on January 13, 2026, reflecting broader investor optimism tied to policy certainty and fiscal flexibility expected under a new administration. Market participants are closely monitoring the 330-seat Diet, with recent polling indicating a 62% likelihood of an election call by mid-February. This probability has driven a 7.4% rise in Japan's 10-year government bond futures over the past week, as investors anticipate potential fiscal stimulus and structural reforms. The yen strengthened by 1.3% against the dollar, reversing earlier weakness, as foreign institutional flows increased in anticipation of policy-driven economic revival. The surge in the Takaichi Trade is most evident in options markets, where the implied volatility of Japanese equities has risen to 25.4%—the highest since October 2024. This reflects active positioning ahead of election-related market volatility. Key sectors benefiting include infrastructure, green energy, and defense, with Tokyo Electric Power Company and Mitsubishi Heavy Industries posting gains of 5.1% and 4.6%, respectively. The rally underscores a broader shift in investor sentiment, as the market prices in a potential change in fiscal direction. While the ruling party has not officially announced any plans, the increasing market anticipation is already shaping capital allocation and risk appetite across the region.