Ishin lawmakers are set to meet later on Monday to discuss forming a coalition with the ruling Liberal Democratic Party (LDP), followed by talks between Takaichi and Ishin leaders Fumitake Fujita and Osaka Governor Hirofumi Yoshimura, where the alliance is expected to be finalised.
"The relationship of trust is deepening substantially, and I believe that's what the other party is thinking," Fujita said on Sunday.
Japan's blue-chip Nikkei share index jumped more than two per cent in early trading.
A co-operation agreement would deliver a combined 231 seats in parliament's dominant lower house.
It would fall two short of a majority, but ensure Takaichi likely wins a vote in parliament on Tuesday to pick Japan's next prime minister.
She will only need a majority of ballots cast rather than of all members in any runoff vote.
The expected deal with Ishin follows the collapse of the LDP's 26-year coalition with Komeito, which ended its alliance after the ruling party picked Takaichi as its new leader.
Komeito's abrupt withdrawal triggered talks among opposition parties, including the second largest Ishin, that could have derailed her premiership ambitions and thrown her party out of power for the first time in more than a decade.
Ishin's decision to side with the LDP ends that possibility.
Takaichi, a fiscal dove, has called for higher spending and tax cuts to cushion consumers from rising inflation and has criticised the Bank of Japan's decision to raise interest rates.
She favours revising Japan's pacifist postwar constitution to recognise the role of its expanding military.
