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 jumped 2.8% to 47,061.07 in

early trade, while the broader Topix was up 2.1%.

The yield on the two-year Japanese government bond

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.