"Sell Japan" transaction leads to a threefold decline in stocks, bonds, and foreign exchange. The market boom after Mayor Takashi's election was short-lived.

As the market grows uneasy about the government's upcoming stimulus package, Japanese Prime Minister Takaichi Sanae faces her first major market test since being elected. The market is concerned that Takaichi's spending plan will worsen Japan's fiscal woes, leading to a sharp drop in Japanese government bond prices, a faster decline in the yen, and further risks of falling into or being intervened in dangerous territory. Meanwhile, the Nikkei 225 index saw its steepest drop since April this week. The Japanese government is expected to announce the long-awaited economic stimulus package on Friday, but "sell Japan" trades may just be getting started. Overnight, bond yields and the yen, both near multi-decade highs, fell by 1%, adding increasing pressure. Despite an optimistic earnings report from NVIDIA Corporation and expectations of a stock market rebound on Thursday, unresolved diplomatic disputes remain a risk. Mark Dowding, investment chief at RBC BlueBay Asset Management, said that if Takaichi loses policy credibility, investors will start selling off all assets. Amir Anvarzadeh, Japan stock strategist at Asymmetric Advisors Pte., said that the honeymoon period is over. While initially traders were cheering Takaichi and her stimulus policies, many are now "drowning."