TOKYO, 28 October 2025 – Japanese equity markets are entering a phase of heightened sensitivity as investors prepare for a much-anticipated meeting between Prime Minister Sanae Takaichi and U.S. President Donald Trump. Market participants are treating the encounter as a potential catalyst for policy shifts that may reverberate through Asia’s largest export-driven economy.
Why the Meeting Matters for Investors
Takaichi, who recently secured leadership of the ruling Liberal Democratic Party (LDP), is widely viewed as a pro-stimulus, growth-oriented politician. The so-called “Takaichi trade” has already buoyed Japanese stocks, with the benchmark Nikkei 225 breaking the 50,000 mark for the first time on expectations of fiscal expansion and looser monetary stances.
The meeting with Trump is therefore being watched for signals on:
- U.S.–Japan coordination around trade and investment policy, which could spur export and manufacturing sectors.
- Potential commitments by Japan on defence spending and deeper integration with U.S. supply-chains, which could benefit industrial, semiconductor and defence equities.
- Whether Japan remains comfortable with the Bank of Japan maintaining loose monetary policy under Takaichi’s agenda, especially in the context of a weaker yen and export strength.
Market Reaction and Risks
While investors are upbeat, there are important caveats:
- Much of the optimism appears priced in. If the meeting fails to deliver concrete outcomes, stocks may face a correction.
- A weaker yen, which buoyed exporters, also raises inflation and cost pressures. Financials may be less benefitted if monetary policy cannot normalise as expected.
- Trade commitments or shifts in policy could come with strings attached, including structural reforms or higher spending, raising fiscal and macro risks.
What Asian Investors Should Watch
For investors in Asia, particularly those with exposure to Japanese-listed stocks or Japanese export chains, the following points are critical:
- Monitor announcements emanating from the Takaichi-Trump meeting for any investment pledges, supply-chain statements, or trade-commitments involving Japan.
- Track currency and bond-market moves: a weaker yen or rising bond yields could tilt sectoral performance (exporters vs domestic service firms).
- Evaluate whether sectors with association to “Japan as growth leader” (auto, tech, defence, semiconductors) spike and whether that momentum is sustainable beyond political signalling.
