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Japan's prime minister might call an earlier-than-expected general election as soon as next month, so investors promptly dusted off the Takaichi trade.

Japan's first female prime minister only took office in October, but she already seems eager to swap flattering poll numbers for real votes in the ballot box.

Investors reignited the Takaichi trade, shoving stocks higher while knocking the yen lower on expectations of more government spending and steady interest rates.

The Nikkei 225 index notched a record high, leaving it about 6% higher since the start of the year.

The yen fell to its weakest level against the US dollar since July 2024, back when the Japanese government had to burn through roughly $100 billion to prop it up.

A weaker yen can give Japanese firms a lift, making the money they earn abroad worth more when it's brought home.

That can help push stock prices even higher.

Still, policymakers won't want the yen to fall too fast.

While a weaker currency makes exporting more lucrative, it also makes imports more expensive.

That can stoke inflation and squeeze households.

And with Japan's finance minister already sounding the alarm, traders are wary of possible further intervention.

Even at its highest in 30 years, Japan's benchmark rate is still only about 0.75%, far below that of the US and Europe.

That makes the yen an attractive form of cheap funding for a carry trade, where investors borrow in an affordable currency and park that money in higher return markets abroad.

With so many investors effectively selling the yen, its value keeps getting pushed down.

And unless Japan lifts interest rates closer to other major economies' levels, that pressure is unlikely to let up.