Takaichi Trade Faces Risks: Inflation, Yen Slump, Yield Jump Threaten Japan's Rally

• Prime Minister Sanae Takaichi's snap election plans initially boosted Japanese stocks, but risks loom from potential overspending.
• The "Takaichi trade" involves investors buying stocks on expectations of increased government spending, similar to Shinzo Abe's Abenomics.
• Takaichi aims to consolidate power to pursue pro-stimulus policies, prioritizing AI, semiconductors, defense, space, and content industries.
• Rising break-even inflation rates suggest market expectations for looser, more inflationary policies post-election, potentially exceeding BOJ's target.
• The yen's slump to a multi-year low intensifies inflation concerns and could undermine consumer spending, posing a significant risk to Takaichi's support.

Why It Matters: Takaichi's pro-stimulus policies could fuel inflation and yen depreciation, threatening Japan's stock rally and voter support.