Japan's Nikkei surges to record after election win by fiscal dove Takaichi

By Junko Fujita and Rocky Swift

TOKYO, Oct 6 (Reuters) - Japan's Nikkei share gauge surged past the 46,000 level for the first time on Monday after fiscal dove Sanae Takaichi was elected to lead the ruling party and become the next prime minister.

The Nikkei 225 Index .N225 jumped 2.8% to 47,061.07 in early trade, while the broader Topix .TOPX was up 2.1%.

The yield on the two-year Japanese government bond JP2YTN=JBTC fell 5 basis points (bps) to 0.89%, reflecting expectations of later rate hikes by the central bank. The yen slid more than 1% against the dollar and euro.

Takaichi, 64, was considered to have the most expansionist fiscal and monetary agenda among five candidates in the Liberal Democratic Party race to replace hawkish Prime Minister Shigeru Ishiba.

In the lead-up to the LDP race, a "Takaichi trade" emerged - long on stocks and bearish on Japanese government bonds, particularly longer maturities - positioning for a win by the veteran lawmaker who is a devotee of the "Abenomics" stimulus policies of the late Shinzo Abe.