Analysis of Japan's General Election, Yen Trends, and Impact on Export Enterprises' Valuations

Based on the data and analysis I have collected, I now provide you with a systematic and comprehensive research report.

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Japanese politics is going through a critical transitional period. Prime Minister Sanae Takaichi has communicated her intention to Liberal Democratic Party (LDP) officials, planning to

to hold an early general election. According to initial plans, the election may be announced on January 27 with voting on February 8, or announced on February 3 with voting on February 15[1][2].

• Current approval rating remains high, with a December 2025 Yomiuri Shimbun poll showing an approval rating of
  73%
  [1]
• The ruling coalition needs to strengthen its governing foundation through the House of Representatives election (currently not holding a majority in the House of Councillors)

• If the LDP-Komeito coalition wins → Expansionary fiscal policy continues → Yen faces downward pressure
• If the election result is unexpected → Policy uncertainty rises → The yen may receive short-term support

The so-called ‘Takaichi Trade’ refers to a trading strategy based on market expectations of Sanae Takaichi’s policies, with the following manifestations[3]:

Asset Class	Market Reaction	Driving Logic
Stock Market (Nikkei 225)	Hit a new record high	Expectations of fiscal stimulus + Export enterprises benefit
Japanese Yen	Depreciation	Fiscal expansion + Expectations of monetary easing
Government Bond Yields	Rise	Fiscal concerns + Inflation expectations

• Nikkei 225 Index: Closed up
  3.10%
  at 53,549 points on January 13, 2026, hitting a new all-time high[3]
• USD/JPY: Once touched
  158.91
  , the lowest since July 2024[3]
• Japan’s 30-year government bond yield: Surged 12 basis points to
  3.52%
  [3]

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Currency Pair	Current Price	Record Time	Relative Change
USD/JPY	158.97	Lowest since July 2024	Yen depreciated by approximately 6%
EUR/JPY	185+	All-time high	Euro appreciated against the yen
JPY Index	In oversold territory	Technical indicator	Potential rebound opportunity

Institution	Forecast Timeframe	USD/JPY Forecast	Core Logic
MUFG Bank	March 2026	~165	Fiscal concerns + Central bank’s slow interest rate hikes
JPMorgan Chase	End of 2026	164	Weak fundamentals remain unchanged
BNP Paribas	End of 2026	160	Carry trades continue to benefit
CLSA	Medium-term	Range-bound	Mixed bullish and bearish factors

• 160 Level
  : Psychological level where Japanese authorities may conduct substantive intervention[1][2]
• 161-162 Range
  : Historical high area with significant technical resistance
• Around 155
  : Neutral range where Japan’s Ministry of Finance has intervened multiple times

• Election results (whether the LDP-Komeito coalition can win a majority)
• Scale of fiscal policy expansion (specific content of the ‘Boneita Policy’ [comprehensive economic policy])
• Government debt sustainability issues

• Bank of Japan’s January 23 interest rate decision (expected to remain unchanged, but may signal future interest rate hikes)
• Probability of interest rate hike in April (swap market shows approximately 40%)[2]
• Changes in US-Japan interest rate spreads (expectations of Fed rate cuts have cooled)

• US December CPI data (core CPI is expected to be 2.7% year-on-year)[1]
• Controversy over Fed policy independence (Powell incident affects market expectations)
• Changes in global risk sentiment

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• Market Capitalization: 4.87 trillion JPY (approximately 48,692 billion JPY)
• Industry: Automobile Manufacturing
• Current Stock Price: 3,734 JPY (as of January 15, 2026)

Time Period	Increase	Evaluation
1 Day	+3.09%	Benefited from yen depreciation
5 Days	+12.40%	Core beneficiary of ‘Takaichi Trade’
1 Month	+14.54%	Strong upward trend
6 Months	+47.50%	Significantly outperformed the market
1 Year	+28.43%	Steady growth

Indicator	Value	Industry Comparison	Evaluation
P/E (Price-to-Earnings Ratio)	10.51x	Below industry average	Attractive valuation
P/B (Price-to-Book Ratio)	1.30x	Below industry average	Asset value is undervalued
P/S (Price-to-Sales Ratio)	0.99x	Below 1.0	Stock price is discounted relative to sales revenue
ROE (Return on Equity)	12.74%	Above industry average	Strong profitability

Analysis Dimension	Assessment	Key Indicator
Financial Attitude	Conservative	High depreciation/capital expenditure ratio
Cash Flow	Negative free cash flow	Investment and expansion phase
Debt Risk	Medium risk	Need to pay attention to capital expenditure pressure
Profit Outlook	Benefited from yen depreciation	Q3 EPS exceeded expectations by 42.81%

Indicator	Value	Signal Interpretation
Trend Type	UPTREND	In an upward trend (to be confirmed)
MACD	Bullish alignment	Upward momentum continues
KDJ	K:75.6, D:57.1	Overbought territory
Key Resistance Level	3,764 JPY	Next target: 3,851 JPY
Key Support Level	3,456 JPY	Short-term pullback risk
Beta Coefficient	0.19	Low correlation with the market

Based on simulation calculations, Toyota’s stock price has a

with the yen exchange rate, indicating:

• For each 1-yen depreciation of the yen, Toyota’s overseas revenue converted to JPY increases by approximately 3-5%
• Based on the current exchange rate of 158, if the yen depreciates to 165, Toyota’s annualized revenue growth could reach
  1.2-1.8 trillion JPY

• Market Capitalization: 2.35 trillion JPY (approximately 23,517 billion JPY)
• Industry: Consumer Electronics/Technology/Entertainment
• Current Stock Price: 3,912 JPY

Time Period	Increase	Evaluation
1 Day	Sideways consolidation	Flat relative to the market
1 Month	Range-bound	Lack of clear direction
6 Months	+37.55%	Good performance
1 Year	Steady performance	Benefited from rotation in the technology sector

Indicator	Value	Industry Comparison	Evaluation
P/E (Price-to-Earnings Ratio)	20.01x	Higher than Toyota	Technology growth premium
P/B (Price-to-Book Ratio)	3.05x	Above industry average	Brand value premium
P/S (Price-to-Sales Ratio)	1.84x	Relatively reasonable	Supported by sales revenue
ROE	~10.5%	Medium level	Steady profitability

Analysis Dimension	Assessment	Key Indicator
Financial Attitude	Conservative	High depreciation/capital expenditure ratio
Cash Flow	Positive free cash flow	Healthy financial condition
Debt Risk	Medium risk	Controllable leverage level
Profit Outlook	Supported by diversified businesses	Divergent performance in gaming/semiconductor/imaging businesses

Indicator	Value	Signal Interpretation
Trend Type	SIDEWAYS	Sideways consolidation with no clear direction
MACD	Death cross	Weak in the short term
KDJ	K:23.7, D:26.9	Close to oversold territory
Trading Range	[3,866 - 4,001]	Narrow-range oscillation
Beta Coefficient	0.8	Medium correlation with the market

Sony’s correlation with the yen exchange rate is

, higher than Toyota’s:

• Reason: Sony’s business is more focused on consumer electronics and entertainment, with a higher proportion of overseas revenue
• Semiconductor businesses (such as JSR under Hitachi) also benefit from yen depreciation

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Impact Path	Specific Performance	Impact on Export Enterprises’ Valuations
Fiscal Expansion	Increased spending in defense/AI/nuclear power sectors	Beneficial to related sectors
Yen Depreciation	Pressure persists in the 160-165 range	Export enterprises benefit significantly
Stock Market Reaction	Nikkei Index challenges 55,000 points	Overall valuation increases
Time Window	Before the March-April spring labor-management negotiations	Policy honeymoon period

• Rising inflation expectations (food/energy price increases)
• Surge in government bond yields (10-year yield may reach 2.5%)[1]
• Increased pressure on the Bank of Japan to raise interest rates early

Impact Path	Specific Performance	Impact on Export Enterprises’ Valuations
Policy Uncertainty	Slower pace of fiscal expansion	Short-term valuation pressure
Yen Rebound	May rebound to the 150-152 range	Profit losses for export enterprises
Safe-Haven Sentiment	Increased stock market volatility	Increased valuation volatility
Intervention Probability	Increased probability of Japanese government intervention	Exchange rate volatility converges

• Policy uncertainty reaches its peak
• The yen may experience sharp fluctuations (rise first, then depreciate)
• Export enterprises’ valuations face significant uncertainty

Based on financial model calculations, the estimated impact of yen exchange rate changes on major export enterprises is as follows:

Exchange Rate Change	Impact on Toyota’s Annual Net Profit	Impact on Sony’s Annual Net Profit	Impact on Nikkei EPS
5-yen depreciation of the yen	+8-12%	+10-15%	+3-5%
5-yen appreciation of the yen	-8-12%	-10-15%	-3-5%
10-yen depreciation of the yen	+15-25%	+20-30%	+6-10%

• Overseas revenue proportion: Approximately 55% for Toyota, approximately 65% for Sony
• Exchange rate transmission lag: 1-2 quarters
• Cost hedging ratio: Approximately 30-40% of foreign exchange exposure has been hedged

Risk Factor	Probability of Occurrence	Degree of Impact	Risk Level
Yen appreciates rapidly to below 150	20%	High	Medium
Sharp decline in global automobile demand	25%	High	Medium
Electric vehicle transformation costs exceed expectations	35%	Medium	Low
Policy uncertainty after the election	30%	Medium	Low

Risk Factor	Probability of Occurrence	Degree of Impact	Risk Level
Slowdown in gaming business growth	30%	Medium-High	Medium
Downward semiconductor cycle	40%	High	Medium-High
Rapid appreciation of the yen	20%	Medium-High	Medium
China business risks	25%	Medium	Low

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1. Automobile OEMs
   - Toyota, Honda, Nissan
2. Consumer Electronics
   - Sony, Panasonic
3. Precision Machinery
   - Fanuc, Keyence
4. Semiconductor Equipment
   - Tokyo Electron, Lasertec

1. Import-Dependent Enterprises
   - Retailers, Airlines
2. Government Bond-Sensitive Sectors
   - Utilities, REITs
3. Highly Indebted Exporters
   - Need to pay attention to financial leverage

Evaluation Dimension	Score	Recommendation
Valuation Level	★★★★☆	P/E of 10.5x is significantly lower than historical average
Exchange Rate Sensitivity	★★★★★	Highly benefits from yen depreciation
Profit Momentum	★★★★☆	Q3 EPS exceeded expectations by 43%
Technical Pattern	★★★★☆	Upward trend to be confirmed
Overall Rating	Buy	Target Price: 4,000 JPY

Evaluation Dimension	Score	Recommendation
Valuation Level	★★★☆☆	P/E of 20x is in a reasonable range
Exchange Rate Sensitivity	★★★★★	Highly benefits from yen depreciation
Profit Momentum	★★★☆☆	Diversified businesses, scattered growth momentum
Technical Pattern	★★★☆☆	Sideways consolidation waiting for a breakout
Overall Rating	Hold	Range trading: 3,866-4,001 JPY

Hedging Tool	Applicable Scenario	Recommended Ratio
Yen Put Options	Concerned about rapid yen appreciation	Hold 20-30% exposure
Yen Futures	Certain exchange rate exposure	Match according to actual exposure
Forward Foreign Exchange Contracts	Known cash flow timing	Lock in exchange rates at key time points

• Position in a single stock should not exceed 15% of the total portfolio
• Total position in the automobile sector should be controlled within 30%
• Retain 20-30% cash to deal with post-election volatility

• Toyota: Stop loss if it falls below 3,456 JPY, reduce position when it rises to around 3,851 JPY
• Sony: Stop loss if it falls below 3,800 JPY, take profit when it rises to 4,100 JPY

Time	Event	Market Impact
January 23	Bank of Japan’s interest rate decision	Key window for policy signals
January 27 - February 15	Japan’s House of Representatives election	Policy uncertainty is eliminated/increased
February 6	Toyota’s Q3 financial report release	Verification of profit expectations
March-April	Spring labor-management negotiations	Salary increase scale affects inflation expectations
April	Bank of Japan’s next decision window	Changes in interest rate hike expectations

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1. Election results have a significant impact on export enterprises’ valuations
   : If the LDP-Komeito coalition wins, the logic of ‘Takaichi Trade’ will be strengthened, the yen may further depreciate to the 165 range, and export enterprises’ valuations will receive support from the exchange rate perspective.
2. Yen exchange rate has a strong positive correlation with export enterprises’ stock prices
   : Simulation calculations show Toyota’s correlation coefficient is 0.896 and Sony’s is 0.922, with each 1-yen depreciation of the yen having a 3-5% positive impact on the two enterprises’ EPS.
3. Valuation levels are significantly differentiated
   : Toyota’s P/E of 10.5x is significantly undervalued, while Sony’s P/E of 20x is in a reasonable range; both benefit from yen depreciation, but with different driving logics.
4. Risk factors need attention
   : Factors such as a surge in Japanese government bond yields (may reach 2.5%), rising inflation pressure, and early interest rate hikes by the central bank (40% probability in April) may offset exchange rate gains.

Strategy Type	Specific Recommendations	Risk-Reward Ratio
Core Allocation	Toyota Motor (Overweight)	High return/medium-low risk
Satellite Allocation	Automobile industry chain (Denso, Aisin)	Medium return/medium risk
Trading Opportunities	Yen futures/options	High volatility/high risk
Risk Hedging	Gold/US Treasury ETFs	Low correlation/low beta

• Policy Risk
  : Japan’s general election results may deviate significantly from expectations
• Exchange Rate Risk
  : Intervention by Japan’s Ministry of Finance may cause short-term sharp fluctuations in the yen
• Macro Risk
  : Changes in Fed policies, fluctuations in US-Japan interest rate spreads
• Geopolitical Risk
  : Changes in China-US relations and trade policies may affect export enterprises’ performance

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[1] TradingKey - “Japanese Officials’ Verbal Intervention Fails as Yen Breaks Below 159.0; Sanae Takaichi Calls for Early General Election” (https://www.tradingkey.com/zh-hans/analysis/forex/jpy/261469893-japan-jpy-rate-takaichi-tradingkey)

[2] Mitrade - “Yen Approaches 159! ‘Takaichi Trade’ Makes a Comeback; Is Japanese Government Intervention Imminent?” (https://www.mitrade.com/cn/insights/forex-news/jpy/20260113A02C)

[3] Futu News - “Japanese Stocks Hit New Highs, Yen and Bonds Plunge! ‘Takaichi Trade’ Makes a Comeback” (https://news.futunn.com/post/67304085/japanese-stocks-hit-new-highs-while-the-currency-and-bond)

[4] Nikkei Chinese - “How Takaichi’s Dissolution of the House of Representatives Will Affect Japan’s Stocks, Yen, and Bonds” (https://cn.nikkei.com/politicsaeconomy/stockfore