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Japanese Stocks Surge on "Takaichi Trade": ETFs in Focus
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Japan’s Nikkei 225 index surged more than 4% on Oct. 6, 2025, to hit an all-time high. The country’s ruling Liberal Democratic Party elected conservative Sanae Takaichi as its new leader on Saturday. The election positioned her to become the country’s first female prime minister, per CNBC.
The move sparked optimism over a potential revival in government spending and a continuation of loose monetary policy, per Reuters, as quoted on Yahoo Finance. The recent rally in the Japanese stock markets was helped by real estate, technology, and consumer cyclical shares.
Bond Yields and Yen React Sharply
The 30-year Japanese government bond (JGB) plunged, pushing its yield to a record high, per Reuters, while the two-year note yield fell amid expectations of delayed rate hikes by the Bank of Japan. The yen tumbled moderately against the U.S. dollar and dropped to historic lows versus the euro.
Takaichi’s Expansionist Agenda
Takaichi is viewed as the most expansionist candidate among the five contenders in the Liberal Democratic Party (LDP) race, succeeding the hawkish Prime Minister Shigeru Ishiba, per Reuters.
“The Nikkei was on course to reach as high as 48,000 by year-end, but because Takaichi was chosen as the LDP leader, it shot up toward that level already,” said Hitoshi Asaoka, chief strategist at Asset Management One, as quoted on Reuters.
As a candidate, Takaichi proposed enhancing investment in strategic business sectors, including artificial intelligence, semiconductors, nuclear fusion and defense, per the Reuters article.
ETFs to Gain
Against the aforementioned backdrop, below we highlight a few exchange-traded funds (ETFs) that could be potential winners.
Currency-Hedged Large-Cap ETFs
The rally in Japanese equities will likely boost demand for Japan-focused large-cap ETFs. The Nikkei is an export-heavy index and thus fares better in a falling yen environment. A weaker yen boosts the profitability of Japan's major export-oriented companies.
However, this also means that the U.S. dollar will likely gain strength against the yen. This makes the case for investing in a currency-hedged Japan large-cap ETF strong.
WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) , XtrackersMSCI Japan Hedged Equity ETF (DBJP - Free Report) and iShares Currency Hedged MSCI Japan ETF (HEWJ - Free Report) are some of the ETFs that should gain ahead. DXJ was up 2.8% on Oct. 6, 2025.
Inverse Yen
ProShares UltraShort Yen (YCS - Free Report) gained 3.8% on Oct. 6, 2025, on a falling yen. Note that hopes of easier monetary policy weighed on the yen ETF Invesco CurrencyShares Japanese Yen Trust (FXY - Free Report) . The ETF FXY slumped 1.9% on Oct. 6, 2025.
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Japanese Stocks Surge on "Takaichi Trade": ETFs in Focus
Japan’s Nikkei 225 index surged more than 4% on Oct. 6, 2025, to hit an all-time high. The country’s ruling Liberal Democratic Party elected conservative Sanae Takaichi as its new leader on Saturday. The election positioned her to become the country’s first female prime minister, per CNBC.
The move sparked optimism over a potential revival in government spending and a continuation of loose monetary policy, per Reuters, as quoted on Yahoo Finance. The recent rally in the Japanese stock markets was helped by real estate, technology, and consumer cyclical shares.
Bond Yields and Yen React Sharply
The 30-year Japanese government bond (JGB) plunged, pushing its yield to a record high, per Reuters, while the two-year note yield fell amid expectations of delayed rate hikes by the Bank of Japan. The yen tumbled moderately against the U.S. dollar and dropped to historic lows versus the euro.
Takaichi’s Expansionist Agenda
Takaichi is viewed as the most expansionist candidate among the five contenders in the Liberal Democratic Party (LDP) race, succeeding the hawkish Prime Minister Shigeru Ishiba, per Reuters.
“The Nikkei was on course to reach as high as 48,000 by year-end, but because Takaichi was chosen as the LDP leader, it shot up toward that level already,” said Hitoshi Asaoka, chief strategist at Asset Management One, as quoted on Reuters.
As a candidate, Takaichi proposed enhancing investment in strategic business sectors, including artificial intelligence, semiconductors, nuclear fusion and defense, per the Reuters article.
ETFs to Gain
Against the aforementioned backdrop, below we highlight a few exchange-traded funds (ETFs) that could be potential winners.
Currency-Hedged Large-Cap ETFs
The rally in Japanese equities will likely boost demand for Japan-focused large-cap ETFs. The Nikkei is an export-heavy index and thus fares better in a falling yen environment. A weaker yen boosts the profitability of Japan's major export-oriented companies.
However, this also means that the U.S. dollar will likely gain strength against the yen. This makes the case for investing in a currency-hedged Japan large-cap ETF strong.
WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) , Xtrackers MSCI Japan Hedged Equity ETF (DBJP - Free Report) and iShares Currency Hedged MSCI Japan ETF (HEWJ - Free Report) are some of the ETFs that should gain ahead. DXJ was up 2.8% on Oct. 6, 2025.
Inverse Yen
ProShares UltraShort Yen (YCS - Free Report) gained 3.8% on Oct. 6, 2025, on a falling yen. Note that hopes of easier monetary policy weighed on the yen ETF Invesco CurrencyShares Japanese Yen Trust (FXY - Free Report) . The ETF FXY slumped 1.9% on Oct. 6, 2025.