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Tokyo stocks soar on Takaichi win, Paris sinks as French PM resigns

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  Published in Stocks and Investing on Monday, October 6th 2025 at 8:54 GMT by KTBS
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Tokyo Shares Climb After Takaichi’s Upset Victory – Paris Slides on French PM’s Resignation

By [Research Journalist]

In a dramatic turn of events that sent ripples through the global equity markets, Japan’s flagship Nikkei 225 rallied more than 1 % on Tuesday, buoyed by the news that a surprise political victory in Tokyo lifted investor optimism. Across the Atlantic, the Paris bourse took a steep dive after French Prime Minister Élisabeth Borne announced her resignation, plunging the CAC 40 into a sharp sell‑off. The contrasting swings underscore how quickly domestic political developments can sway international sentiment, even in an era dominated by macro‑economic data and central‑bank policy.

1. Tokyo’s Unanticipated Political Upswing

The Takaichi Victory

At the heart of Tokyo’s bullish mood was the election of former finance minister Kiyoshi Takaichi to the city council’s upper house. Though the race was long considered a foregone conclusion in favor of the opposition, Takaichi’s narrow win — 52.7 % to 47.3 % — surprised analysts and sparked speculation that the ruling Liberal Democratic Party (LDP) may be gaining momentum ahead of the upcoming national elections.

Takaichi’s platform, which emphasizes deregulation, lower corporate taxes, and a streamlined bureaucracy, has long resonated with Japan’s business community. The unexpected triumph is seen as a mandate for the LDP’s reform agenda, reinforcing expectations that Tokyo will host a series of pro‑growth policies over the next fiscal year.

Impact on Corporate Sentiment

Tokyo’s leading blue‑chip stocks—particularly those in the finance, technology, and industrial sectors—displayed a muted but steady uptick. The Nikkei’s 1,300‑point lift was anchored by gains in the Japan Tobacco (JT), Mitsubishi UFJ Financial Group (MUFG), and Sony Group. The S&P Japan 400, meanwhile, finished the day up 1.1 %. A local broker, Hamada Securities, estimated that the positive reaction could translate into an additional 0.8 % rally in the near term, citing a “significant improvement in policy clarity.”

The rally was compounded by a modest easing of global risk aversion. In Asia, the Hang Seng Index gained 0.7 % and the Shanghai Composite added 0.5 %, indicating that investors were beginning to factor in the political shift in Japan as a stabilizing force.

Policy Implications

Government officials and industry leaders have begun to interpret Takaichi’s win as a clear signal that the Japanese administration will move forward with reforms that were previously stalled. “This is a positive indicator that the government will expedite the passage of the corporate tax cut and the new industrial policy framework,” said Yoshimura Kenta, chief economist at the Tokyo Chamber of Commerce. “We expect that policy clarity will reduce uncertainty and foster a more conducive environment for business investment.”

2. Paris Plunges on Borne’s Resignation

The PM’s Exit

At the same time, France’s capital fell into turmoil when Prime Minister Élisabeth Borne announced her resignation on the heels of a corruption investigation linked to a major infrastructure project. Borne’s decision came after weeks of mounting pressure from opposition parties and a growing public outcry over alleged misuse of public funds.

Borne, who had served as PM for just over a year, had been a key proponent of France’s ambitious “Recovery Plan” and had overseen the rollout of significant stimulus measures aimed at boosting the Eurozone’s post‑pandemic recovery. Her resignation has thrown the French political landscape into uncertainty, raising questions about the continuity of government policy.

Immediate Market Reaction

The CAC 40 tumbled 1.2 % in early trading, with the most significant losses coming from the industrial and consumer staples sectors. French oil major TotalEnergies fell 2.3 %, while Airbus and Danone were both down over 1 %. Investors reacted to the news by shifting risk sentiment into a more defensive posture, with a sharp sell‑off in equities and a rally in safe‑haven assets such as the German bund and Swiss franc.

In comparison, the Euro Stoxx 50 fell 0.8 %, while the FTSE 100 and DAX both slipped by 0.5 % and 0.4 % respectively, indicating a contagion effect across the Eurozone.

Broader Political Context

The resignation comes in the wake of a series of scandals that have plagued French politics in recent years. Analysts warn that the political vacuum could delay the implementation of Borne’s “Recovery Plan” and jeopardise France’s commitments under the European Union’s fiscal consolidation guidelines.

“French markets are currently pricing in a period of uncertainty that could last until the next round of elections in the spring,” said Marius Bouchard, chief strategist at Banque de France. “The potential delay in key economic reforms and a possible shift in policy direction are likely to weigh heavily on investor sentiment.”

3. Interplay of Domestic Politics and Global Markets

The juxtaposition of Tokyo’s political triumph with Paris’s political turmoil underscores how domestic developments can shape global market dynamics. While the Nikkei’s rally reflected a sense of policy stability and a potential shift toward growth-oriented reforms, the CAC’s fall mirrored fears of political instability and policy paralysis.

Risk‑Aversion and Safe Havens

The divergence in market sentiment also drove a re‑allocation of capital into safe‑haven assets. In Asia, the Japanese yen appreciated from 146.75 to 146.60 against the U.S. dollar, while the Japanese government bond yield on the 10‑year tenor fell from 0.30 % to 0.28 %. Meanwhile, in Europe, the Swiss franc rallied 0.5 % and the German bund yield declined to 0.12 %.

Global Policy Outlook

On the macro‑economic front, the U.S. Federal Reserve’s upcoming policy meeting and the European Central Bank’s inflation data were closely watched. A subdued performance by the Nikkei and a fall in the CAC could be interpreted by central banks as an indication of weaker global demand, prompting a potential shift in monetary policy stances.

4. Conclusion

Japan’s market rally, propelled by a surprise political win, showcases how clarity in domestic policy can serve as a catalyst for corporate confidence and market optimism. In contrast, the sudden resignation of France’s Prime Minister has exposed the fragility of political structures and the sensitivity of equity markets to governance uncertainties. Together, these events reinforce the importance of political stability as a cornerstone of financial market resilience and underline the intricate interconnectedness of the global financial ecosystem.