FX.co ★ Japanese Shares Fall Amid Political Uncertainty

The Nikkei 225 Index experienced a 1% decline, settling around 47,590, while the broader Topix Index fell 0.7% to 3,175 in Tuesday’s trading following a public holiday. This marked the second consecutive session of losses for Japanese equities, driven by political uncertainty and the unwinding of the so-called “Takaichi trade.” The announcement last Friday by Japan's Komeito party about its withdrawal from the ruling coalition with the Liberal Democratic Party has heightened skepticism regarding Sanae Takaichi's policies, complicating her potential path to the prime ministership. Previously, the "Takaichi trade" had been largely fueled by expectations of increased fiscal spending and deferred interest rate increases, contributing to yen depreciation, stock market gains, and a steeper yield curve. Among the major stocks declining were SoftBank Group, down 1.6%, IHI Corp, down 0.5%, Mitsubishi UFJ, down 0.9%, Kawasaki Heavy Industries, down 1%, and Sumitomo Mitsui, which fell 1.3%.