Why Japan’s elections are a short-term drag, but a long-term win for Bitcoin

The landslide election in Japan boosted stock prices, but put more pressure on Bitcoin in the short term as capital rotated and liquidity tightened.

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

The result has sent Japanese stocks soaring while increasing short-term pressure on Bitcoin (BTC), even as longer-term policy shifts in Tokyo could support institutional adoption of the cryptocurrency.

Takaichi’s victory changes capital flows

The market reaction to the election was swift, with Japanese shares rising to new record highs in the hours after the outcome, and the Nikkei extending gains as traders priced in aggressive fiscal stimulus and a more tolerant stance on yen weakness.

Market watcher Ash Crypto wrote on

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

Meanwhile, GugaOnChain noted that the so-called ‘Takaichi trade’ is not simply an exit from US assets, but a portfolio rebalancing. Japanese government bonds, sidelined for years by ultra-low yields, are attracting incremental capital as fiscal expansion raises reflation expectations.

That rotation coincided with a decline in US stocks. Over the past seven days, the Nasdaq Composite is down about 5.6%, the S&P 500 is down about 2.7% and the Russell 2000 is down almost 2.6%.

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A stronger dollar, driven by yen weakness and persistent interest rate differentials between the US and Japan, has further tightened financial conditions. During these risk phases, Bitcoin has tended to move alongside US stocks, allowing equity-led risk reduction to spill over into the crypto markets.

“The Takaichi trade strengthens Japan, but puts pressure on the US and Bitcoin,” wrote GugaOnChain. “Capital flight into Japanese government bonds and a robust dollar are creating an environment of inevitable adjustment, requiring investors to closely monitor the correlation between US indexes and crypto assets.”

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% in the past week and almost 22% in the past month.

Adding to the market’s sense of vulnerability, the Bitcoin Fear and Greed Index fell to a six-year low on February 7, after BTC fell from above $90,000 to almost $60,000 in late January before recovering.

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

Yet Japan’s political backdrop looks different from the immediate risky trade. With a two-thirds majority, Takaichi’s government has room to make legislative changes, and officials have previously labeled Web3 as an industrial policy focus. As such, analysts expect discussions on crypto tax reforms and stablecoin regulations to resume.

As XWIN concluded:

“Short-term pressure on US stocks and Bitcoin is macro-driven, while Japan’s institutional reforms could support crypto markets in the longer term.”