Why Japan’s Election Is a Short-Term Drag but Long-Term Win for Bitcoin

Japan’s ruling bloc secured a two-thirds majority in the Lower House on February 8, handing Prime Minister Sanae Takaichi a decisive victory that has already reshaped global market positioning.

The result has lifted Japanese equities while adding short-term pressure to Bitcoin (BTC), even as longer-term policy shifts in Tokyo may support institutional crypto adoption.

Takaichi’s Victory Reshapes Capital Flows

Market reaction to the election was swift, with Japanese stocks pushed to fresh record highs in the hours after the result, and the Nikkei extending gains as traders priced in aggressive fiscal stimulus and a more tolerant stance toward yen weakness.

Market watcher Ash Crypto wrote on X that Japan’s stock market had hit a new all-time high following Takaichi’s victory, reflecting optimism around domestic reflation.

Research firms and analysts were more cautious about global spillovers. XWIN Research described the outcome as bearish for Bitcoin in the near term, pointing to tighter global liquidity and shifting capital flows.

Meanwhile, GugaOnChain noted that the so-called “Takaichi Trade” is not a simple exit from U.S. assets but a portfolio rebalance. Japanese Government Bonds, sidelined for years by ultra-low yields, are attracting incremental capital as fiscal expansion raises reflation expectations.

That rotation has coincided with a pullback in U.S. equities. Over the past seven days, the Nasdaq Composite fell about 5.6%, the S&P 500 slipped by about 2.7%, and the Russell 2000 dropped close to 2.6%.

A stronger dollar, driven by yen weakness and persistent rate gaps between the U.S. and Japan, has tightened financial conditions further. In these risk-off phases, Bitcoin has tended to move alongside U.S. equities, allowing equity-led de-risking to spill into crypto markets.

Weak Sentiment Now, Policy Tailwinds Later

At the time of writing, BTC was trading just below $71,000, up about 2% on the day but down more than 6% over the past week and nearly 22% in the last month.

Adding to the feeling of fragility in the market, the Bitcoin Fear and Greed Index fell to a 6-year low on February 7 after BTC slid from above $90,000 in late January to near $60,000 before rebounding.

CryptoQuant’s latest report shows Bitcoin trading below its 365-day moving average, with spot and institutional demand weak and liquidity tightening, all common features of a bear phase.

Still, Japan’s political backdrop looks different beyond the immediate risk-off trade. With a two-thirds majority, Takaichi’s administration has room to pursue legislative changes, and officials have previously framed Web3 as an industrial policy focus. As such, analysts expect discussions around crypto tax reform and stablecoin rules to resume.

As XWIN concluded,

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