Japan’s ruling coalition achieved a two-thirds majority in the Lower House election on February 8, granting Prime Minister Sanae Takaichi a remarkable victory, which is shifting the dynamics in global markets.

This outcome has skyrocketed Japanese equities while simultaneously putting short-term pressure on Bitcoin (BTC), though changes in Japan’s policies may eventually encourage institutional cryptocurrency acceptance.

Takaichi’s Victory and Capital Shifts

The market responded quickly to the election results, with Japanese stock indices reaching new record heights shortly after the announcement. The Nikkei index surged as traders anticipated significant fiscal stimulus and a softer approach toward yen depreciation.

Market observer Ash Crypto noted on X that Japan’s stock market had achieved an unprecedented all-time high post-Takaichi’s electoral win, mirroring growing optimism regarding domestic inflation.

Analysts, however, were reticent about potential global repercussions. XWIN Research described the election result as bearish for Bitcoin in the short term, highlighting concerns about tightening global liquidity and altered capital flows. On the other hand, GugaOnChain pointed out that the so-called “Takaichi Trade” signifies more than a mere pullback from U.S. assets; it’s a realignment of portfolios, with Japanese Government Bonds, previously disregarded due to low yields, now drawing renewed interest as fiscal expansion spurs inflation expectations.

Recent market trends show a pullback in U.S. equity markets, with the Nasdaq Composite having decreased around 5.6%, the S&P 500 dropping by roughly 2.7%, and the Russell 2000 falling close to 2.6% over the past week.

Weak Market Sentiment Today, but Potential Policy Support Ahead

Currently, BTC trades just below $71,000, reflecting a modest increase of 2% today, even though it has dipped over 6% in the past week and nearly 22% in the prior month.

The Bitcoin Fear and Greed Index recently touched a six-year low, falling on February 7 after Bitcoin plummeted from above $90,000 in late January to nearly $60,000 before recovering. CryptoQuant’s latest report indicates that Bitcoin is trading below its 365-day moving average, with feeble spot and institutional demand alongside tightening liquidity—common indicators of a bear market phase.

Nonetheless, Japan’s political landscape might change distinctively beyond the immediate risk aversion. With a two-thirds majority, Takaichi’s administration could undertake legislative reforms, having earlier framed Web3 technology as a crucial policy objective. Therefore, expectations are rising around potential discussions on crypto tax reform and stability regulations.

As XWIN concluded, “Immediate challenges impacting U.S. equities and Bitcoin arise from macro factors, while Japan’s institutional reforms may nurture crypto markets in the long run.”