How Japan’s “Takaichi trade” may weaken Bitcoin’s short-term outlook

Japan’s “Takaichi trade” is shifting global capital flows and tightening liquidity, adding short-term downside pressure to Bitcoin as U.S. stocks weaken.

Summary

• Japan’s election win has boosted stocks and weakened the yen.
• Portfolio rebalancing is reducing liquidity in U.S. markets.
• Equity weakness is spilling into Bitcoin trading.

Bitcoin is facing fresh near-term pressure as political shifts in Japan reshape global capital flows and reinforce a cautious tone across risk markets.

In a Feb. 9 analysis, CryptoQuant contributor XWIN Research Japan said the landslide victory of Prime Minister Sanae Takaichi in the Feb. 8 lower house election has accelerated what traders now call the “Takaichi trade,” a mix of aggressive fiscal policy, tolerance for yen weakness, and support for loose monetary conditions.

The ruling Liberal Democratic Party-led coalition secured a two-thirds supermajority, giving the new administration broad room to push stimulus and regulatory reforms.

Markets responded quickly. The Nikkei 225 climbed to fresh record highs above 57,000 on Feb. 9, while the yen weakened toward 157 per dollar before stabilizing on intervention talk. Japanese government bonds also came under pressure as investors adjusted to higher spending expectations.

At the same time, U.S. equities slipped into correction territory. Over the past seven days, the Nasdaq fell 5.59%, the S&P 500 declined 2.65%, and the Russell 2000 dropped 2.6%, reflecting tighter liquidity and a re-assessment of risk.

Portfolio rebalancing tightens conditions for risk assets

According to XWIN Research Japan, the current shift is less about capital fleeing the United States and more about global portfolio rebalancing.

“Japanese government bonds, long sidelined by ultra-low yields, are regaining appeal,” the report said, as fiscal expansion and reflation expectations lift returns.

As JGBs attract fresh capital, inflows into U.S. equity exchange-traded funds have slowed. This has reduced marginal liquidity in global stock markets and added pressure to already fragile sentiment.

Analyst GugaOnChain said the adjustment is unfolding across multiple asset classes at once. Money is rotating toward domestic Japanese assets, exporters, and selected commodities, while exposure to U.S. growth stocks is being trimmed.

Dollar strength has added another layer of stress. Yen weakness, persistent U.S.–Japan rate gaps, and defensive demand for dollars have tightened financial conditions, making leveraged trades more expensive to maintain.

In this setting, risk assets tend to move together. When U.S. equities weaken, portfolio managers often cut crypto exposure at the same time to control overall volatility.

Equity-led de-risking spills into Bitcoin markets

XWIN Research Japan said Bitcoin’s recent weakness fits this pattern.

In risk-off phases, Bitcoin (BTC) has tended to track U.S. equities, allowing stock market selling to spill into crypto. The current decline, the firm argued, is driven by cross-asset risk management rather than deterioration in on-chain activity.

CryptoQuant’s cross-asset indicators show that simultaneous equity corrections raise the probability of Bitcoin downside even when long-term holders are not selling. Recent price moves reflect futures unwinds and position reductions, not broad capitulation.

This dynamic has been visible in derivatives markets, where open interest has fallen and leverage has been cut over the past two weeks. Traders appear more focused on preserving capital than on chasing rebounds.

From a medium- to long-term perspective, the outlook diverges.

After the Feb. 8 election delivered a supermajority, the Takaichi administration has now gained the political space to advance structural reforms. Officials have positioned Web3 as a developing industry, and stablecoin laws and tax adjustments are expected later in 2026.

These actions could eventually attract institutional participation and strengthen Japan’s standing as a regulated hub for digital assets. 

But for the time being, Bitcoin is still vulnerable to global risk cycles. As long as U.S. stocks are still under pressure and capital flows adjust to Japan’s fiscal pivot, short-term downside risks are likely to persist even if longer-term fundamentals hold.