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Sanae Takaichi successfully succeeded as the president of the Liberal Democratic Party and became Japan’s first female prime minister in history. Due to market expectations that her fiscal stimulus policies will drive economic growth, Japanese stocks have performed exceptionally well. The Nikkei Index surged 16.6% in October alone and has continued its upward trend since November, ranking among the top performers in major global stock markets. It officially surpassed the 50,000-point mark, marking a return to a bullish trend for Japanese stocks, and Japanese stock funds have risen accordingly!

Japan’s First Female Prime Minister

Due to extreme dissatisfaction with black money politics and high inflation, Japan’s former Prime Minister Shigeru Ishiba stepped down in less than a year in office. The ruling Liberal Democratic Party (LDP) suffered consecutive defeats in last October’s House of Representatives election and this July’s House of Councillors election, experiencing its biggest setback since its establishment in 1955. For the first time, the party lost its majority seats in both houses of the Diet, becoming a minority ruling party. Although Sanae Takaichi unexpectedly defeated Shinjiro Koizumi in the LDP presidential election, the Komeito Party, which had co-governed with the LDP for 26 years, withdrew from the ruling coalition, temporarily hindering the LDP’s cabinet formation. Fortunately, the Japan Innovation Party later aligned with the LDP, and the two reestablished a “governing policy alliance.” Sanae Takaichi officially became Japan’s 104th prime minister and the country’s first female prime minister in history.

Since Sanae Takaichi took office, she has injected fresh energy and generational resonance into Japanese politics. Her personnel arrangements, which emphasize cross-faction integration and practical orientation, have softened the old political culture of power balancing. Her strong and steady leadership image meets society’s desire for both stability and reform. The cabinet’s formation immediately sparked a surge in public support and boosted the momentum of the Liberal Democratic Party (LDP). During the Asia-Pacific Economic Cooperation (APEC) summit, she courted Trump and engaged warmly and closely with leaders from various countries. According to the latest statistics from multiple polls, the approval rating of Takaichi’s cabinet soared to 74%, reaching a nearly 20-year high—over 20 percentage points higher than the 51% approval rating when the Ishiba cabinet was formed. With overwhelming public support from the start, she has revitalized the organizational strength and social momentum of the LDP, and her influence continues to rise.

New Golden Era and Headwind

Takaichi, who is considered Abe’s successor, has continued Abe’s policies in both diplomacy and the economy. Japan had promised in tariff negotiations to invest $550 billion in the United States, and both Japan and the U.S. jointly signed an agreement to promote the U.S.-Japan alliance toward a “golden era.” They also announced corporate investment projects totaling 60 trillion yen, covering four major areas: energy, AI power development, AI infrastructure, and critical minerals. However, a Japanese research report indicates that this move could lead to unfavorable outcomes, including a 0.4% decrease in Japan’s GDP, a 1.3% drop in exports, and a 2.6% increase in corporate bankruptcies.

The Japanese Cabinet Office announced that the Gross Domestic Product (GDP) contracted by 1.8% quarter-on-quarter from July to September, marking the first shrinkage in six quarters, but it was better than market expectations. Prime Minister Kō has long advocated increasing government spending and implementing loose monetary policies to stimulate economic growth. During his campaign for the leadership of the Liberal Democratic Party, he even promoted the slogan “Japan is Back,” calling for a comprehensive revival of the Japanese economy and pushing a tough policy of issuing deficit-financed bonds. Both the yen and Japanese government bonds were sold off in the market simultaneously; the yen sharply depreciated past 150 yen to the dollar, and the 10-year Japanese government bond yield hit a 17-year high. He also identified semiconductors, AI, aerospace, defense, and cybersecurity among 17 key industries, aiming to significantly reduce dependence on China. After taking office, Prime Minister Kō stated that his administration would adopt a stance of “responsible proactive fiscal policy,” no longer confined to the previous goal of achieving fiscal balance “year by year,” with the aim of stimulating domestic demand and increasing income. The plan is to first expand investment to effectively boost the economy.

BOJ’s Monetary Policy

Despite continuous applause for the Takashi Cabinet, whether it can effectively address inflation has now become an urgent priority for the administration. Japan’s Ministry of Internal Affairs and Communications announced that the core Consumer Price Index (CPI) for September rose 2.9% year-over-year, in line with market expectations. Inflation in Japan has remained at or above the Bank of Japan’s 2% target for three and a half consecutive years. However, real household wages have been declining, putting tremendous pressure on private consumption. In particular, rice prices in Japan have doubled over the past year, with September’s rice prices soaring 48.6% compared to the same month last year. Various government administrative measures have failed to curb this, sparking widespread public discontent. The market had originally expected the Bank of Japan (BoJ) to raise interest rates in the short term, but since Takashi has indicated a desire for the BoJ to align with the government’s overall policy direction, the pace of BoJ rate hikes is likely to be slower than anticipated.

LDP’s Challenge

Although the Liberal Democratic Party (LDP) has maintained its position as the ruling party and kept the prime minister’s seat, the right-wing conservative coalition government formed by the LDP and the Japan Innovation Party has intensified the rightward conservative shift in Japanese politics. Moreover, the coalition government does not hold a majority in either the House of Representatives or the House of Councillors, so the LDP’s rule remains fraught with challenges. Notably, Japan’s last three prime ministers—Yoshihide Suga and Shigeru Ishiba—each served only about a year before stepping down. Prime Minister Takaichi takes an extremely tough stance on China in terms of defense and diplomacy, adding more uncertainty to Japan’s economy and foreign relations. Takaichi may dissolve the Diet early next year to hold a general election. Amid these numerous challenges, can she break the cycle of having a new prime minister every year? If Takaichi leads the LDP to victory and secures a smooth re-election next year, it is expected that a stable, long-term administration will be established, potentially ushering in a new golden era for Japan. This could further boost Japan’s economic performance and stock market.

Equity Japan Funds Performance Analysis

With numerous favorable factors supporting it, the Japanese stock market has been soaring continuously. According to Lipper statistics, as of November 11 this year, the Nikkei 225 index has surged by as much as 27.4% year-to-date, ranking among the top performers in global stock markets and has surpassed the historic milestone of 50,000 points. However, the leading sectors driving this rally are clearly differentiated. Recently, the bullish momentum has mainly centered around AI-related semiconductor equipment and electronic components, including test equipment, substrates, storage, as well as passive components, glass fiber cloth, and copper foil that have been upgraded in specifications to meet AI server demands. Currently, there are 36 registered Japanese equity funds (including ETFs) available for sale domestically. Measured in New Taiwan dollars, Japanese equity funds have achieved an average year-to-date return of 12.2%, a three-month average return of 14%, a six-month average return of 15.4%, and a one-year average return of 11.2%. These short-, medium-, and long-term performances, as well as the year-to-date returns, all fall significantly short of the Nikkei 225’s performance.

Table 1: Outperforming Equity Japan RFS in Taiwan
 

Source：LSEG Lipper, as of 2025/11/19, in TWD

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