Will Takaichi's 'Abenomics' weaken the yen and raise the ire of Trump?

Key Points

• Markets have responded to Sanae Takaichi's victory with the so-called "Takaichi trade," pushing the Nikkei 225 to record highs and weakening the yen to beyond the 150 mark against the dollar.
• But will this draw the ire of U.S. President Donald Trump, who earlier accused Japan of "killing their currency"?
• A weaker yen will increase the competitiveness of Japan's exports, but also draw in imported inflation, which has been a sticking point against the LDP.

The late Shinzo Abe (L) and Sanae Takaichi (R) at a science and technology innovation conference in Tokyo on October 22, 2014.

For years, U.S. President Donald Trump has accused Japan of engaging in "unfair trade practices" -- a criticism that dates back to his days as a real estate mogul.

In March, Trump again singled out Japan, alleging that Tokyo weakened its currency to gain an unfair trade advantage. "I've called the leaders of Japan to say you can't continue to reduce and break down your currency," he said.

Then–Prime Minister Shigeru Ishiba reportedly told Japan's parliament that the country was not pursuing a so-called "currency devaluation policy" -- a point that his predecessors, including the late Shinzo Abe, had stressed in their meetings with Trump.

Now, as Abe's protégé, Sanae Takaichi, is poised to helm the world's fourth-largest economy, the same concern could be rearing its ugly head again.

Takaichi has been widely labeled as an apostle of "Abenomics," the economic strategy of Abe, which espoused loose monetary policy, fiscal spending and structural reforms.

During last year's ruling Liberal Democratic Party leadership race, she criticized the Bank of Japan's plan to raise interest rates and, by extension, strengthen the yen.

Markets have responded with the so-called "Takaichi trade," pushing the Nikkei 225 to record highs and weakening the yen to beyond the 150 mark against the dollar.