Japan's Nikkei seen hitting new highs as yen, bonds sputter on Takaichi victory

Group 1 - Japanese shares are expected to continue setting records following the election of Sanae Takaichi, who is anticipated to adopt an expansionist fiscal and monetary agenda [1][2] - A "Takaichi trade" has emerged, characterized by long positions on stocks and bearish positions on Japanese government bonds, particularly longer maturities, in anticipation of her victory [2] - The Nikkei index reached a record closing high of 45,769.50, driven by investor optimism regarding a more dovish successor to Prime Minister Ishiba [3] Group 2 - Short positions on the Nikkei index have been accumulating, which may lead to a short-covering rally, potentially pushing the index towards the 47,000 level [4] - The Japanese government bond market has faced challenges due to declining demand from traditional buyers and concerns over increasing debt, with the 30-year JGB yield reaching a record 3.285% [4][5] - Recent market dynamics showed a slowdown in the Nikkei's momentum, with longer-term JGBs rallying as Takaichi appeared to moderate her stance on fiscal policies [6]