News Connect あなたと経済をつなぐ5分間 #ニュースコネクト · News
【10月16日】高市政権1年「高市トレード」に転機。株高・国債安はなぜ変わり始めた？
The Takaichi (高市) administration marks its first anniversary on October 21, but the milestone is shadowed by the resignation of the Minister of Agriculture over a campaign-transport scandal — the cabinet's first dismissal due to misconduct. In markets, the "Takaichi trade" of long Japanese equities and short government bonds has delivered returns of more than 30% since October last year, yet investors are now unwinding the short-bond leg as the 10-year JGB yield has climbed to 3.115% — above the TOPIX forward dividend yield for the first time since at least 2005. Prime Minister Takaichi herself has simultaneously shifted her messaging from reflation toward fiscal discipline, setting up a difficult balancing act for year two.
Listen to this episode Go to the show page
What this episode answers
What kind of investment strategy is the Takaichi trade, and why did it emerge?
The Takaichi trade pairs long Japanese equities with short Japanese government bonds (JGBs). The administration's plan for more than ¥370 trillion in combined public and private investment over 14 years was expected to lift corporate earnings — making stocks attractive — while expanded fiscal spending was expected to increase JGB issuance and push yields higher, making bonds worth selling; bundling both sides into one strategy is what markets called the Takaichi trade.
How much did the Takaichi trade return over the past year?
According to Bloomberg Intelligence data, a combination of long TOPIX and short JGBs returned more than 30% since October last year; Japanese equities hit all-time highs and the 10-year JGB yield nearly doubled to 3.115%.
Why are investors now reconsidering their short positions in Japanese government bonds?
The 10-year JGB yield has risen to around 3%, now exceeding the TOPIX forward dividend yield of 2.3% — a gap that is the widest in data going back to 2005 — prompting Sylvia Sheng of J.P. Morgan Asset Management to close her short JGB position in September, explaining that "there is now clearly investment value at current yield levels."
How has Prime Minister Takaichi's own economic messaging changed over the past year?
Initially seen as a reflationist, Takaichi this month said "Japan's economy is not in a phase where reflationary policy is needed" and in her policy speech stressed that "fiscal sustainability is an obvious prerequisite," signaling a clear pivot from aggressive fiscal stimulus toward fiscal discipline.
What challenges does the Takaichi administration face in its second year?
The administration must simultaneously pursue economic growth through ¥370 trillion in investment, fiscal consolidation to keep the national debt in check, and price control — including a plan to cut the consumption tax on food to 1% from April next year — to improve household living standards that have not kept pace with record stock prices.
Year One of the Takaichi Administration: First Cabinet Reshuffle
The Takaichi (高市) administration marks one year in office on October 21. On the eve of that milestone, the Minister of Agriculture, Forestry and Fisheries resigned after the opposition pressed him over allegations that his campaign had bussed supporters to polling stations free of charge — making it the first cabinet resignation due to scandal under Takaichi. Politically, the timing stings. But looking back at the past year through a market lens, a rather different picture emerges.
What Is the Takaichi Trade?
The "Takaichi trade" is an investment strategy that pairs long Japanese equities with short Japanese government bonds (JGBs). When the administration launched, it announced a policy target of more than ¥370 trillion in combined public and private investment over 14 years, spanning areas from AI and semiconductors to defense. The logic ran as follows: government spending plus the private investment it would attract would lift economic growth and corporate earnings, making stocks worth buying. At the same time, expanded fiscal spending would mean more JGB issuance and higher yields, making bonds worth selling. Combining both sides into a single trade is what markets came to call the Takaichi trade.
Results Over the Past Year — and the Turning Point
The trade paid off. According to Bloomberg Intelligence data, a combination of long TOPIX and short JGBs returned more than 30% since October last year. Japanese equities reached all-time highs, and the 10-year JGB yield nearly doubled over the year, rising to 3.115%.
Now, however, investors are revisiting the "sell bonds" leg of the trade. The reason is straightforward: rising yields have made JGBs themselves attractive. The 10-year yield stands at around 3%, compared with a forward dividend yield of 2.3% for TOPIX over the next 12 months. Bonds are now yielding more than stocks — and that gap is the widest in data going back to 2005. Sylvia Sheng of J.P. Morgan Asset Management closed her short JGB position in September, explaining that "there is now clearly investment value at current yield levels."
Takaichi's Own Message Has Shifted
It is not only investors who have changed course. The administration's messaging has also evolved. At launch, Prime Minister Takaichi was widely seen as a reflationist — someone who believed in loose monetary policy and aggressive fiscal stimulus to push up growth and prices. This month, however, she said outright that "Japan's economy is not in a phase where reflationary policy is needed." Her policy speech also stressed that "fiscal sustainability is an obvious prerequisite."
Behind the pivot lies the hard reality of limits on expansionary fiscal policy. As this programme covered last week, fiscal jitters in France sent its bond market into sharp turbulence. In Japan, concerns about yen weakness and rising prices remain deeply entrenched. U.S. Treasury Secretary Bessent has also pressed Japan on fiscal discipline, and in July Japan and the United States stepped in together with coordinated currency intervention. A year ago it was the expectation of a more stimulative government that buoyed the Takaichi trade; today the question markets are asking is how much stimulus is actually safe.
What the Second Year Must Answer
The Takaichi administration plans to cut the consumption tax rate on food to 1% from April next year. Price increases of up to 23% on everyday items such as coffee beans and bento boxes have continued through this year, meaning that even with stock prices at record highs, many households feel little improvement in their standard of living.
The test for year two is whether the administration can simultaneously strengthen the economy through ¥370 trillion in investment without letting national debt grow too large, and keep prices and interest rates in check while also making everyday life more affordable. Three goals — economic growth, fiscal consolidation, and price control — all at once. Threading that needle is the central challenge of the administration's second year.
Takeaways
- The Takaichi trade — buying Japanese stocks and selling JGBs — returned more than 30% over the past year, but investors are now unwinding the short-bond leg as the 10-year JGB yield at ~3% has surpassed TOPIX's 2.3% forward dividend yield, the widest gap since at least 2005.
- Prime Minister Takaichi has pivoted from her initial reflationary stance, declaring this month that Japan "is not in a phase where reflationary policy is needed" and emphasizing fiscal sustainability in her policy speech.
- In its second year the administration must balance ¥370 trillion in investment-driven growth against fiscal discipline and price control, including a plan to cut the food consumption tax to 1% from April — three simultaneous objectives that represent the central challenge ahead.
This article is edited from a machine transcript of the first 30 minutes of the episode. It is not an official summary — please listen to the episode itself.