Japanese stocks reach new highs with positive outlook on Sanae Takaichi

Global Markets Surge on Trade Deal Hopes

Markets around the world are seeing an upswing with optimism that President Donald Trump and Chinese President Xi Jinping may agree to extend their trade ceasefire during a critical meeting in South Korea this week.

On Monday, Japan’s Nikkei stock average surpassed 50,000 yen for the very first time, while South Korea’s Kospi jumped over 2%, hitting a record high.

Futures for the S&P 500 and Nasdaq Composite rose by 0.7% and 1%, respectively. Similarly, Euro Stoxx600 futures increased by 0.4%. In Asia, China’s CSI300 index rose by 0.7%, and Hong Kong’s Hang Seng index climbed 0.9%.

Gold prices dipped 1% to $4,071 per troy ounce as the demand for safer assets waned. Bitcoin, however, saw an increase of 1.4%, reaching $114,921 per token, continuing its upward trend from the weekend.

U.S. officials now anticipate that China may postpone any restrictions on rare earth exports after recent trade discussions with Malaysia. Wee Koon Cheong, a senior strategist at BNY, noted that stocks across Asia have risen on the hope of extending the ceasefire, which is set to end next month. “Everything points to sentiment improving a bit,” he remarked.

The new Prime Minister Sanae Takaichi’s positive outlook on growth policies seems to have also fueled the rise in the Nikkei Stock Average.

The Nikkei, primarily composed of major companies, outperformed the broader Topix index, which includes many smaller firms. Japanese equity strategist Neil Newman at Astris Advisory mentioned that this performance indicates that the rally is largely driven by foreign investors.

“I think 60,000 by next summer is completely achievable… The speed at which the market is moving is something we haven’t seen since the big Abenomics backlash ten years ago. Everything feels sluggish, but there’s real momentum,” Newman said.

According to Nicholas Smith, another equity strategist at CLSA, the Nikkei’s surge represents a significant cultural shift. He emphasized that last year’s breakthrough past the 40 mark shattered a figurative glass ceiling, while this year’s return to form illustrates that Japan is once again a viable ground for serious investment.

The rise of the Nikkei was largely driven by a notable 7.1% increase in defense maker Kawasaki Heavy Industries, following Takaichi’s recent policy speech which detailed plans to enhance economic growth and boost defense spending.

This announcement coincided with President Trump’s upcoming visit to Japan and Takaichi’s anticipated efforts to strengthen the Japan-U.S. alliance and establish a friendly rapport with the American president.

BNY’s Chong had a positive outlook, stating that Japanese stock prices are likely to continue their upward trajectory. “We’re probably going to see new highs for many days ahead,” he commented. “I don’t think this is the end yet.”