by Jack Diffley
Investors welcome political stability and expectations of economic stimulus as the prime minister secures the strongest parliamentary mandate in decades
Japanese equities surged to unprecedented levels following Prime Minister Sanae Takaichi’s decisive victory in a snap general election, a result that investors see as paving the way for political stability and a more assertive economic agenda.
On Monday, the Nikkei 225 climbed as much as 5.7 per cent, briefly crossing the 57,000 mark for the first time in its history before ending the session nearly 4 per cent higher. The broader Topix index also reached a record, moving above 3,800 and closing up more than 2 per cent.
Market participants attributed the rally to a renewed “Takaichi trade”, driven by expectations that the prime minister’s overwhelming parliamentary majority will allow her to push through stimulus measures and encourage corporate investment, particularly in strategic technology sectors. Sunday’s vote handed Takaichi a two-thirds supermajority in the 465-seat lower house, giving the ruling Liberal Democratic Party its largest margin since its foundation in 1955. Senior party figures privately acknowledged that the scale of the victory exceeded internal forecasts.
Economists and strategists highlighted the importance of political continuity in boosting investor confidence. Mansoor Mohi-uddin, chief economist at Bank of Singapore, said the result reduced near-term political uncertainty and made Japan stand out among advanced democracies. Others urged caution, noting that long-term investors would focus on how campaign promises translate into concrete policy. “This is a strong start, but execution will matter,” said Tomochika Kitaoka, chief Japan equity strategist at Nomura.
Japanese stocks have significantly outperformed US markets this year, a trend that could attract fresh overseas inflows, according to analysts at Goldman Sachs. Technology and industrial shares led Monday’s gains, with chip-testing equipment maker Advantest jumping more than 11 per cent.
Takaichi has outlined plans for targeted spending in areas such as artificial intelligence, semiconductors and defence, while also signalling her intention to open a parliamentary debate on revising Japan’s post-war constitution, including its pacifist clause. Any amendment would face formidable hurdles, requiring supermajorities in both houses of parliament and approval in a national referendum.
Defence-linked stocks reacted positively, with shares in Mitsubishi Heavy Industries rising more than 3 per cent. Meanwhile, currency strategists warned that renewed enthusiasm for Takaichi’s policies could put downward pressure on the yen. Analysts at Citi suggested the currency could weaken towards ¥160 per dollar, although it was trading little changed around ¥156.50 as officials said they were monitoring market moves closely. Japan’s 10-year government bond yield edged slightly higher.
(Associated Medias) – all rights reserved
L’articolo Japanese Markets Hit New Highs After Takaichi’s Sweeping Election Victory proviene da Associated Medias.
