The Takaichi Trade Is Back on the Radar Screen - The Nikkei Surges and JGB Yields Pop

The re-emergence of the Takaichi trade pushes the DOJ criminal probe of the Fed off the front pages.

Key Takeaways

• Japanese Markets Move on Election Rumors: The big moves overnight were in Japan, where the Nikkei 225 soared by +1,609 points or by +3.1% to a record 53,549 alongside a +7.5-basis point hike in the 10-year JGB yield to 2.16%. The reason? Reports circulating that Japanese Prime Minister Sanae Takaichi is planning for a snap election to capitalize on her near-70% approval rating and strengthen the LDP’s power in the lower house of parliament.

• Bond Market Jitters Over CPI: Bond yields in the U.S. and across the Atlantic have nudged up between +2 and +3 basis points ahead of today’s December CPI data, which investors see coming in at +0.3% MoM for the headline and core (with upside risk). The 10-year note is trading just a snick below 4.2% and remains at the high end of the recent range. The jitters in the bond market over this number have sent the 10-year TIPS breakeven level back up to 2.3%, the highest it has been since November.

• Rosie Model Portfolio Starts The Year Strongly: We have not participated in the U.S. AI craze, but that has not stopped the Rosie Model Portfolio from posting a near +4.0% total return year-to-date after being up more than +30% in 2025 and +57% since inception three years ago (the 60-40 asset mix, by way of comparison, is up +1.2% YTD and the S&P 500 by +1.8%). It goes to show that even radical perma bears can make you money as they save you money.