Japanese Stock Market Rises After Election Victory

Japanese stocks reached record highs on Monday, buoyed by Prime Minister Sanae Takaichi’s significant election win.

The ruling Liberal Democratic Party secured a two-thirds majority in the 465-member House of Representatives, according to NHK, a public broadcaster.

The Nikkei Stock Average surged by 5.6%, hitting 57,337, while the TOPIX index also climbed over 3%, reaching an all-time high. Sree Kochugovindan, a senior economist at Aberdeen Investments, noted that Takaichi’s strong win could present a favorable outlook for the market in the medium-term, potentially catalyzing strategic investments and tax reforms that might elevate share prices.

In recent months, Japanese stocks have been on the rise, attributed to a “high market trade.” Investors are optimistic that the Prime Minister’s economic approach, seen as a continuation of Abenomics focusing on growth, will drive stock prices higher. However, there’s a sense that the yen may weaken as the Prime Minister aims for monetary easing and increased government spending.

As of late Sunday evening, the real estate sector led the Nikkei’s gains with a more than 7% increase, followed by healthcare and industrial sectors, according to LSEG data. Notably, CyberAgent, a Japanese internet firm, saw a rise of over 16%, while semiconductor manufacturer Advantest jumped more than 12%, and Sumitomo Electric Industries gained more than 11%.

The yen rose to 156.88 against the dollar. The yield on 10-year Japanese government bonds climbed nearly 4 basis points to 2.274%, and the 20-year government bonds increased about 3 basis points to 3.158%.

Credit Agricole CIB remarked that Takaichi’s government has a clear public mandate, which provides momentum for a substantial shift toward a proactive fiscal policy. Additionally, US President Donald Trump congratulated Takaichi on her victory via a post on TruthSocial, highlighting her popularity and respect as a leader.

This election comes after a tumultuous political year, marked by the Liberal Democratic Party losing its majority in the House of Councilors and political upheaval following a defeat in the House of Representatives in 2024, which prompted the resignation of then-Prime Minister Shigeru Ishiba.

Other Asian markets also experienced gains, with South Korea’s Kospi increasing by 4.15% and the smaller Kosdaq up by 2.97%. The Australian S&P/ASX 200 saw a 1.65% rise in early trading, while the Hong Kong Hang Seng Index increased by 1.5%, and the mainland’s CSI300 rose by 0.9%.

In early Asian hours, US futures edged higher. Last Friday, US stocks surged as tech shares bounced back from a period of heavy selling, with Bitcoin recovering from significant losses that had seen it drop over 50% from its highs last October. The Dow Jones Industrial Average closed up 1,206.95 points, or 2.47%, at 50,115.67, surpassing the 50,000 level for the first time. The S&P 500 Index rose by 1.97%, ending at 6,932.30, while the Nasdaq Composite Index increased by 2.18%, closing at 23,031.21. Despite this recovery, the S&P 500 is down 0.1% for the week, while the Nasdaq has seen a decline of 1.8%. However, the Dow has gained 2.5% since the week began, thanks to a rotation into cyclical stocks amidst the ongoing tech sell-off.