October 2025 Monthly: The "Gilded Age" Takaichi Trade and the Trump TACO Trade Collide

 

October 2025 Monthly: The "Gilded Age" Takaichi Trade and the Trump TACO Trade Collide

 

Monday, October 20, 2025

 

① The Market Flocks to Fashionable Trends

 

The Out-of-Control Narrative Economy and the Foreshadowing of the Collapse of Civilization

 

Amid the triple whammy of a weak yen, inflation, and a bubble, policy can no longer be seen as driven by "narratives." The market reacted to the Abenomics double-down, accelerating the "Takaichi Trade." Meanwhile, in the United States, "TACO," a derisive term for Trump's negotiating tactics, became a buzzword. Financial markets appear to be dancing in a bubble, driven by reflexes that follow current trends, emotions, and simplified decision-making rules (heuristics).

 

What is the Takaichi Trade?

 

The Takaichi Trade is an investment behavior in which the market overreacts to the proactive fiscal and monetary easing policies of Prime Minister-elect Sanae Takaichi, resulting in a simultaneous weakening of the yen, rising stock prices, and falling bond prices. This is a market pattern in which policy expectations take the lead, piggybacking on "Sanaenomics," which can be seen as a doubling-down on Abenomics, a policy that has already proven to be a failure.

 

What is the TACO trade?

 

On the other hand, TACO (Trump Always Chickens Out) is an acronym that mocks the pattern of Trump's tough statements, followed by a market crash, a conciliatory stance, and a market rebound. The market incorporates repeated threats and compromises, resulting in short-term risk-on and -off cycles.

 

Fads eventually fade.

 

However, there are inherent risks inherent in the high-market trade, particularly. First, it relies on the way policies are communicated rather than their effectiveness, and political uncertainty could lead to a sudden reversal. Above all, there are concerns that continued simultaneous easing of fiscal and monetary policy will further accelerate inflationary pressures in Japan.

 

TACO also has its perils. Lack of policy consistency exacerbates market instability, and taking positions based on a "complacent" approach could undermine institutional trust.

 

Gold Price Skyrocket and Signs of Civilizational Collapse

 

Ultimately, both the "high market trade" and "TACO" depend more on the way policies are communicated than on their substance. This demonstrates that markets are driven by narratives, not systems, and heralds the arrival of an era in which adaptability prevails over efficiency.

 

The classic "efficient market hypothesis," which holds that markets are always correct and efficient, is on the wane, and the heuristic "adaptive market hypothesis" is increasingly taking center stage among market participants. In particular, last Thursday's surge in gold prices (hit $4,375.80 per ounce, up 65.7% year-to-date) should be interpreted not simply as a flight of assets, but as a sign of institutional fatigue and the collapse of civilization amid a loss of confidence in fiat currencies.

 

In particular, gold prices have been soaring since Federal Reserve Chairman Powell's speech at Jackson Hole this summer. This is not simply a hedge against inflation risk; it must be seen as incorporating an implicit scenario of distrust in fiat currency, institutional fatigue, and the collapse of civilization.

 

 

② Sanaenomics and Trump 2.0 will collide due to a "prisoner's dilemma."

 

Unfortunately, both Sanaenomics and Trump 2.0 are policies based on "inward-looking economic nationalism." While they aim to stimulate the economy in the short term, prioritizing domestic interests, in the long term they will likely lead to a prisoner's dilemma through currency and trade wars, and both Japan and the United States are likely to suffer losses due to xenophobia reminiscent of the former anti-foreigner ideology.

 

Sanaenomics vs. Trump 2.0: Similarities and Differences

 

The policies of both parties share the following similarities:

Item: Sanaenomics Trump 2.0

Fiscal Policy: Active fiscal policy (tax cuts and increased spending); Permanent tax cuts (corporate tax cuts)

Monetary Policy: Pressure on the Bank of Japan to curb interest rate hikes and interference with its independence; Pressure on the Federal Reserve to lower interest rates and interference with its independence

Trade Policy: Promoting exports by inducing a weaker yen; Correcting the trade surplus through increased tariffs

Economic Nationalism: "Reclaiming Japan" and "America First"

 

Both advocate "our country first," but their approaches are deployed on different battlefields: a currency war (Japan) and a trade war (US).

 

Win-Win or Prisoner's Dilemma?

 

Ideally, Japan and the United States should build a "win-win" relationship in which their respective demands complement each other's. However, the reality is that the following structural risks exist:

• Currency war vs. trade war: Yen manipulation worsens the U.S. trade deficit, while Trump's tariffs hinder Japanese exports.

• Prisoner's dilemma: As each country strengthens its own national policies, there is no room for cooperation, ultimately resulting in losses for both sides.

• Institutional fatigue: Central bank independence is undermined and fiscal discipline collapses, leading to a loss of long-term credibility.

 

Gold price surge: A sign of the collapse of civilization.

 

In October 2025, gold prices surpassed $4,000 per ounce for the first time in history, recording a 50-65% increase since the beginning of the year. This is not simply an inflation hedge; it has deeper implications, including:

• Devaluation of the dollar and currency distrust: BRICS countries are increasing their gold purchases, and confidence in U.S. Treasuries is declining.

• Limits of the system: Politics is eroding the independence of the Federal Reserve and the Bank of Japan, calling into question the sustainability of the monetary system.

• Civilizational transition: Historical parallels include the sudden rise in gold prices during the collapse of the Roman Empire, the Spanish Empire, and the Tokugawa Shogunate (during the Meiji Restoration).

 

Gold is a "stateless currency" and a mirror image that acts as a harbinger of institutional collapse.

 

Toward the final chapter of the narrative economy.

 

Sanaenomics and Trump 2.0 both drive markets through "narratives," but when those narratives erode confidence in the system, gold becomes a last resort. The end of civilization may come not with the collapse of the system, but with the end of the story.

 

 

 

③ "The surest way to destroy capitalism is to debase currency."

 

Lenin's words, quoted by Keynes in "The Economic Consequences of the Peace," "The surest way to destroy capitalism is to debase currency" ring almost prophetic in the face of today's inflation and skyrocketing gold prices.

 

The Fuse of Currency Debasement: Sanaenomics and Trump 2.0

 

Both policies have the potential to accelerate the "debasement of currency," which undermines institutional credibility.

Sanaenomics

• Yen Weakening: Pressure on the Bank of Japan to raise interest rates and expansionary fiscal policy have weakened the yen's purchasing power.

• Dilution of Fiscal Discipline: Simultaneous spending sprees have led to the normalization of fiscal deficits.

• Institutional Fatigue: Conflicts with the bureaucracy have intensified, leading to a loss of policy consistency.

 

Trump 2.0

• Politicization of the Dollar: Interference with the Federal Reserve, pressure to lower interest rates, and a desire to weaken the dollar.

• Rekindling of the Trade War: Inflationary pressure and supply chain disruptions due to increased tariffs.

• Fiscal Expansion: Increased debt due to permanent tax cuts and increased military spending.

 

Both policies have a structure that "stimulates the economy at the expense of the currency's value," a perfect example of the "institutional collapse caused by the debasement of the currency" that Lenin warned about.

 

Lenin's Warning and the Modern-Day Fuse

 

Lenin's words, "The debasement of currency is the surest way to destroy an institution," are no longer merely a historical aphorism but are becoming a reality as the consequences of modern policy. Sanaenomics and Trump 2.0 will be the fuse, and the brilliance of gold will serve as a mirror reflecting the decline of institutions. The end of civilization may begin with the collapse of currency.

 

History Ruled by Chance: The Asymmetry of the Meiji Restoration and the Civil War

 

• Without the Civil War of 1861, the United States might have been more proactive in its foreign affairs and might have been able to provide more stable democratic support to Japan at the end of the Edo period.

 

• The Second French Empire also supported Japan in military technology and institutional reforms at the end of the Edo period, while mitigating the hegemonic competition between Britain and France.

 

• If such international cooperation had functioned properly, Japan might have pursued "enriching the country and enriching the people" rather than "enriching the country and strengthening the military," and chosen democratic modernization rather than imperialism.

 

This is not a case of "there are no ifs in history," but rather a perspective that history is a chain of chances and choices, a series of probabilistic branchings.

 

Contemporary Coincidence: The Risk of a Dark Situation in Sanaenomics and Trump 2.0

 

• Both accelerate the "narrativization of institutions," and unpredictable, contingent events (political events, war, financial crises) could potentially cause the collapse of institutions and the downfall of civilization.

 

• This could lead to institutional exhaustion and a return to a mythical order, as in the "Eejanaika Ranbu" (dance dance) and the "Sonno Joi" (revere the Emperor, expel the barbarians) frenzy.

 

• The outcome could be a self-destructive choice for Japan and the United States, or the reconstruction of a new narrative—we stand at this crossroads.

 

At the Intersection of Coincidence and Institutions

 

History is a chain of coincidences, and institutions are the devices that transform those coincidences into narratives. In both Sanaenomics and Trump 2.0, when their narratives transcend institutions, coincidences no longer represent hope but a harbinger of downfall. However, it is precisely in a world ruled by chance that we have the freedom to choose again.

 

 

 

④ The striking similarities between the "Eejanaika" dance of the late Edo period and the modern-day gold dance

 

• Incidentally, common people at the end of the Edo period danced wildly to the "Eejanaika" amid monetary chaos (a three-fold difference in the domestic and foreign prices of gold and silver during the isolation period, followed by a massive outflow of gold and inflow of silver after the country opened up) and hyperinflation, amid soaring prices (rice prices soared approximately eightfold from the end of the Edo period to the Meiji Restoration). This was not just a festival; it was an expression of a loss of faith in the system and a return to a mythical order.

 

• The modern-day gold price surge may also be manifesting as a "gold-shining dance" amid a wavering trust in legal tender and a flight to gold, the currency of an institutionalized era.

 

Sonno Joi and the Excess of Revolutionary Ideology

 

• Sonno Joi was an ideology that combined a return to a mythical order (the emperor) with xenophobia in response to external pressure (the arrival of the black ships) and institutional failure (the shogunate's financial collapse).

 

• This enthusiasm overthrew the pro-opening faction (pro-shogunate, pro-rationalism) and gave rise to the revolution known as the Meiji Restoration. However, history teaches us that the subsequent pursuit of national wealth and military strength and imperialism ultimately led to self-destruction in the recent war.

 

The brilliance of gold signals the decline of institutions.

 

• The current surge in gold prices is a sign that credibility in institutions is eroding and narratives are becoming excessive.

 

• When "narrative policies" like Sanaenomics and Trump 2.0 drive markets without institutional backing, it marks a return of the "Eejanaika" ("What's the Big Deal?") movement. Like the Sonno Joi (Revere the Emperor, expel the barbarians) craze, this could signal institutional collapse and revolution.

 

Risk of Isolation and Self-Destruction and Civilizational Choices

 

If Japan were to once again be consumed by the "narrative enthusiasm" and lose institutional rationality, the isolation and self-destruction seen during the recent war could be repeated. The brilliance of gold could be a bell announcing the death of institutions and the revival of myth.

 

 

 

⑤. Coalition Talks Leave "Politics and Money" Behind—The Future of an Administration Prioritizing Interests Over National Interests

 

The Mainichi Shimbun's editorial, "LDP-Ishin Coalition Talks: Will 'Politics and Money' Be Left Behind?" dated Saturday, October 19th, hits home the current political situation. It's highly persuasive and truly serves as a wake-up call.

 

The LDP-Ishin Coalition Talks portend the birth of a system that prioritizes privileges and interests over national interests. Their rush to enter power while shelving the fundamental issue of political funding transparency will only deepen distrust in politics, far from gaining public trust.

 

The Ishin Party's 12 policy demands include a ban on corporate and organizational donations. However, Yoshimura, the party's leader, stated, "The LDP will never say yes," demonstrating no commitment to making this a reality. This was also the primary reason Komeito distanced itself from the LDP.

 

Despite the Ishin Party's proposal being stricter than the Komeito proposal, it has been left out of the core of the negotiations. This attitude undermines the credibility of the Ishin Party, which advocates political reform. The inclusion of a reduction in the number of Diet seats as an "absolute condition" raises suspicions that this is a tactic to divert the discussion from the issue of political funding.

 

The sub-capital plan, too, is ostensibly intended as a backup function in the event of a disaster, but its true intention is to revisit the "Osaka Metropolitan Government Plan," which was rejected twice in the past. As for social security reform, there are concerns that reducing insurance premiums will lead to a decline in the quality of medical services.

 

Meanwhile, the LDP's efforts to gain a majority are outrageous. The formation of a new parliamentary group with Takashi Tachibana's "Party to Protect the People from NHK" undermines the foundations of democratic politics. Cooperating with individuals who repeatedly spread information of unknown veracity undermines the integrity of the administration.

 

Japan has experienced the 40 years since the Plaza Accord (1985) as a "lost era."

 

Sanaenomics, which could be described as a doubling down on Abenomics, has failed to achieve either price stability or sustainable growth, and is instead accelerating the quadruple whammy of a declining birthrate, stagnant consumption, a weak currency, and rising prices.

 

As the people continue to be exploited, is Japan destined for ruin? This question has become a real one. In an era of multi-party politics, coalition negotiations are inevitable. However, we must not neglect fundamental issues related to trust in politics. Compromises should be made on policy details, not political ethics.

 

 

⑥ Acknowledge the True Risks to the Global Economy in an Era of Monetary Illusion

 

A Nikkei editorial (October 16th, Thursday) characterized the Trump administration's reciprocal tariff policy as "the greatest risk to the global economy." However, this perspective is based on monetary illusion. While tariffs are certainly a contributing factor, concluding that they are the greatest threat misunderstands the true nature of currency and purchasing power.

 

The U.S. has already agreed to a maximum 15% tariff rate on Japan. Meanwhile, the dollar-yen exchange rate exceeds 150 yen against purchasing power parity (1 dollar = 108 yen), representing a depreciation of the yen by approximately 39%. In other words, effective price adjustments through exchange rates are already underway, offsetting the impact of tariffs.

 

Trade and currency are two sides of the same coin, and discussing tariffs in isolation is tantamount to misinterpreting the economic picture.

 

The Japanese Economy's "Quadruple Woes" ​​and the Monetary Illusion

 

The greatest risks facing Japan in 2025 are the following quadruple woes:

• The collapse of the population structure due to a declining birthrate

• Weakening domestic demand due to prolonged consumption stagnation

• Loss of purchasing power due to currency depreciation

• Difficulties in daily life due to rising prices

 

These are real hardships that cannot be captured by nominal indicators. Despite this, the "monetary illusion"—driven by superficial figures like a weak yen and rising stock prices—is distorting public perception.

 

Gold Price Skyrocketing and Collapse of Currency Confidence

 

As already mentioned, the real risk to the global economy is the collapse of currency confidence, symbolized by the abnormal rise in gold prices. As of October 16, gold (gold) recorded $4,375.80 per ounce, up 65.7% since the beginning of the year. This is not simply a flight of assets, but a collapse of fiat currency itself. This is a sign of distrust in things.

 

In particular, the sharp rise in gold prices since the Federal Reserve's Jackson Hole meeting on August 22 is an unusual and alarming phenomenon.

 

The "eye of the storm" in this global currency depreciation trade is none other than Japan's "high market trade," which aims to weaken the yen and boost stock prices.

 

An uncontrollable doubling down: The dangers of Sanaenomics

 

With inflation exceeding 2% for 41 consecutive months since April 2022, "Sanaenomics," which aims to double down on Abenomics, is nothing more than a rehash of policies that failed to achieve price stability and sustainable growth. The vicious cycle of a weak yen, inflation, and a bubble has spiraled out of control, putting Japan on the brink of economic collapse.

 

IMF Outlook and Its Blind Spots

 

The IMF has revised its global growth forecast for 2025 upward to 3.2%. Some believe the impact of Trump's tariffs "isn't as shocking as initially anticipated." However, structural risks, such as a rekindling of US-China tensions, the collapse of the AI ​​boom, and immigration restrictions, remain unmanifest.

 

The pessimistic scenario also suggests that global GDP could decline by 1.2% in 2026. In other words, now is the time for countries to stop settling for a lull and instead rebuild international cooperation to prevent a chain reaction of currency, trade, and hegemony collapses.

 

Conclusion: Clearing the Fog of Monetary Illusion

 

Japan is now on the front lines of global economic risk. Rather than Trump tariffs, the real risk we must face is the inherent crisis caused by monetary illusion and policy fallacies.

 

*Monetary illusion: A psychological tendency to be confused by nominal monetary changes and misjudge real changes in purchasing power and living standards.

 

Tomo Nakamaru, Former World Bank Economist