Japanese banks well placed to join Nikkei's Takaichi euphoria, say analysts

Group 1 - The "Takaichi trade" has led to a significant rise in Japanese stocks, but the banking sector has underperformed as investors reassess their exposure under the new leadership of Sanae Takaichi [1][2] - The Topix banking index fell by 0.12% while the Nikkei share average increased by 4.75%, indicating a divergence in market performance [2] - Despite the recent pullback, banking stocks have rallied by 47% since the Bank of Japan (BOJ) ended its radical stimulus policies in March last year, outperforming the Nikkei's 21% increase during the same period [3] Group 2 - Analysts suggest that banks may benefit from expansionary policies that require financing, and the weakening yen could prompt the BOJ to raise rates despite Takaichi's dovish stance [3][4] - Takaichi's focus on economic security and large-scale infrastructure projects may drive demand for project financing, benefiting both regional and megabanks [5] - Mitsubishi UFJ Financial Group anticipates an average annual boost to pre-tax profits of 166 billion yen ($1.09 billion) from a potential interest rate hike in January 2025, although this would represent less than 10% of its record annual profit of 1.86 trillion yen [6]