Japanese stocks surged to an all-time high on Monday and dominated the gains in the region after a historic victory by Prime Minister Sanae Takaichi in an election.
Public broadcaster NHK reported that the ruling Liberal Democratic Party secured a super majority of two-thirds out of the 465 seats in the lower house. Japan’s Nikkei 225 surged 5.6 percent to reach 57,337, and the Topix rose more than 3 percent, also registering a record high.
Sree Kochugovindan, Senior Research Economist at Aberdeen Investments, said that the ultimate victory of Takaichi would be the “best outcome” for markets over the medium term, as strategic investments and tax reform will strengthen equities.
The Japanese stocks have reached several highs in the recent months as a result of the so-called “Takaichi trade” as market believes that the economic policies of the prime minister, which are perceived to be more growth-focused continuation of the Abenomics, will boost Japanese equities, whereas weakening the yen as the prime minister continues to pressurize on a looser monetary policy and increase in government spending.
Data from LSEG showed that as of 8.11 p.m. ET Sunday, the real estate sector was leading Nikkei gains, up over 7 percent, followed by the healthcare and industrials sectors.
However, the Japanese internet company CyberAgent Inc was the index’s top gainer, up more than 16 percent. Semiconductor equipment manufacturer Advantest more than 12 percent, and Sumitomo Electric Industries recorded a rise of above 11 percent.
The Japanese yen gained power to 156.88 against the dollar. Yields on the 10-year Japanese government bonds increased by almost 4 basis points to 2.274 percent, while yields on 20-year JGBs added about 3 basis points to 3.158 percent.
The administration of Takaichi has acquired greater momentum to undertake the grand change towards a proactive fiscal policy, supported by the clear mandate of the population. Crédit Agricole CIB reiterated a note after her triumph.
Therefore, in a post on TruthSocial, U.S. President Donald Trump congratulated Takaichi on her victory. He wrote, ″She is a highly respected and very popular Leader. Sanae’s bold and wise decision to call for an Election paid off big time. The wonderful people of Japan, who voted with such enthusiasm, will always have my strong support.”
This comes after political turmoil in the previous year, with the LDP losing its majority in the Upper House, and in 2024, a defeat by the Lower House party leading to the resignation of then-Prime Minister Shigeru Ishiba in September.
Other Asian markets also traded higher, with South Korea’s Kospi surging 4.15 percent, while the small-cap Kosdaq gained 2.97 percent. Australia’s S&P/ASX 200 increased 1.65 percent in early trading. Hong Kong’s Hang Seng Index up 1.5 percent, while the mainland’s CSI 300 jumped 0.9 percent.
The U.S. futures inched upwards in early Asian hours. The stocks shot up as tech stocks recovered last Friday in the U.S, after several days of heavy selling in the sector, and bitcoin recovered after a rout that had brought the trendy cryptocurrency more than 50 percent off its peak in October last year.
The Dow Jones Industrial Average rose 1,206.95 points or 2.47 percent to close at 50,115.67. Friday was the first day when the Dow crossed the 50 000 level. The S&P 500 was up 1.97 percent and ended at 6,932.30, while the Nasdaq Composite advanced 2.18 percent to 23,031.21.
Despite the pop of Friday, the S&P 500 recorded a decrease of 0.1 percent, and the Nasdaq dropped 1.8 percent during the week. The 30-stock Dow gained 2.5% this week, which helped it gain some rotation into some economically sensitive stocks, as the entire market was burdened by the selling of tech.
