00:00Pro-stimulus conservative Sanae Takaichi is now poised to become Japan's first female prime minister
00:07after winning the leadership of the ruling LDP.
00:10Let's bring our team out of Tokyo.
00:11Sherry Ahn, our co-anchor for Asia Trade, in the studio and also with her is our Japan equities reporter Alice French.
00:17Sherry, let's start with you.
00:18Quite a big one as markets are repricing their expectations there.
00:23Tell us what the major implication of this would be.
00:27Yeah, we're talking about Sanae Takaichi, right?
00:29I mean, you said it, she's pro-stimulus.
00:31We know that she's a nationalist as well.
00:34She's also a fan of Margaret Thatcher and a known heavy metal music lover and also a drummer.
00:40She is expected to become, as I said, the first female prime minister of Japan when we have a parliamentary vote later this month.
00:48Really showing that the Liberal Democratic Party is betting on this swing back to the right to attract young voters.
00:53She had really widespread grassroots support, which potentially convinced LDP lawmakers that she can really bring the party together.
01:01But it's all about abenomics, right?
01:03And what this means for the markets.
01:06She has been a fan of easy money policy, hawkish when it comes to diplomacy.
01:11She has criticized the Bank of Japan lifting rates.
01:15In the previous campaign last year, she in fact called lifting rates being stupid, although she did dial back her tone on the VOJ during this campaign.
01:24But she has talked about the potential of needing extra bond issuance, which is why you can already see the market implications when it comes to how JGBs are reacting today.
01:34She's talked about raising the tax-free income allowance, really promising those cash handouts and tax rebates to help Japanese households.
01:42And when it comes to really making the new cabinet, of course, will be key.
01:48And what sort of compromise she needs to make with other opposition parties, given that the ruling LDP has, of course, lost the majorities in both chambers of the legislature here in Japan.
02:00That's why potentially some analysts are saying that these moves that we're seeing on the markets today could be short-lived.
02:07Sherry, what about the line as well that Takeuchi needs to walk not just with China, but also with the U.S.?
02:15And you could say perhaps when it comes to negotiations or discussions with both of those different countries and governments, Japan doesn't necessarily hold all the cards.
02:24But you do have that national question as well.
02:26So let's just hear what Takeuchi said about her relationships and what we can expect as well with the Trump administration.
02:32If we face something against national interests, I believe it's important to clearly express our position within the framework of the Japan and U.S. agreement.
02:44At this point, I have no intention of overturning any agreement made so far.
02:52So how is Takeuchi going to be able to not look weak in the eyes of voters, but at the same time, it's going to be difficult to deal with Trump's demands?
03:02Yeah, especially in a month that President Trump is now, according to reports, expected to come to Japan and potentially hold a meeting with Sanaya Takeuchi, right?
03:12And she's mentioned during her campaign that she will be open to renegotiating the free trade agreement, although she's also walked back those comments.
03:21But we know that there could be tensions around the $550 billion investment fund into the U.S.
03:29We have seen, of course, Takeuchi also talk about defense spending.
03:34She's a hardline conservative.
03:35That could actually prove appealing to President Trump, who wants Asian countries to increase defense spending.
03:42But it's a heavy agenda for Takeuchi because we do have the East Asia Summit in Malaysia.
03:49We have the APEC Summit in South Korea later in the month as well.
03:52And we know that she has a reputation as a China hawk, which will alarm Beijing.
03:58She has called to deepen ties with Taipei as well, which will not really play well with China.
04:03She has talked about the Yasukuni Shrine.
04:06She said that she'll make appropriate decisions over praying at the controversial shrine that also honors war criminals.
04:12That is seen as controversial, not only in China, but also in South Korea.
04:17So we are watching those bilateral ties here across Asia as well.
04:22Sanai Takaiichi is now expected to become the first female prime minister of Japan when the parliamentary vote happens later this month.
04:31Alice, can I bring you in?
04:33Sherry mentioned one sector defense.
04:36We're looking at I'm looking at my board here, looking at machinery, look at real estate construction.
04:40How do we now look at sector winners benefiting from this win?
04:45Alice.
04:48Morning.
04:48Yeah, I mean, as you say, we're already seeing defense one of the biggest winners today.
04:52Some defense names up over 15 percent this morning, seeing some of their biggest gains since April, that kind of post-tariff rebound that we saw.
05:00As Sherry mentioned, of course, Takichi has spoken a lot about the fact that she wants to boost defense spending.
05:06She also talks about this kind of strategic investment, right?
05:09So she wants Japan to sort of regain its glory in various key industries, which, of course, includes things like chips, tech, AI.
05:16And so we're also seeing tech stocks pretty strong this morning.
05:20Construction and infrastructure, as you mentioned as well, are set to benefit from more government spending.
05:25Real estate, too, which could be a beneficiary if, you know, if Takichi does put some pressure on the BOJ to kind of scale back those rate hikes.
05:33On the other side, of course, we're seeing banks weaker today.
05:38There are some expectations that, you know, perhaps a rate hike is going to look less likely this month now that we have Takichi,
05:44who is slightly more dovish when it comes to monetary policy sort of at the helm of the LDP.
05:48So it'll be interesting to see how much of a sort of knee-jerk higher it is today for those beneficial industries and whether the momentum can continue under her leadership.
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