Japanese stocks surged to a record high on Monday following a pivotal election victory for Prime Minister Sanae Takaichi, who is leading the ruling Liberal Democratic Party (LDP) to capture a two-thirds supermajority in the 465-seat lower house, as reported by public broadcaster NHK. In response to the political developments, Japan’s Nikkei 225 index soared past 57,000 for the first time, ultimately closing up 3.9% at 56,363.94. The Topix also reached a record high, closing at 3,783.94 with a gain of 2.3%.
Strategic spending and tax reforms are anticipated to fuel growth, according to Sree Kochugovindan, senior research economist at Aberdeen Investments, who labeled Takaichi’s decisive win as a potentially “best outcome” for markets in the medium term. The rise in stock prices aligns with the growing optimism surrounding Takaichi’s economic policies, which are viewed as a continuation of former Prime Minister Shinzo Abe’s Abenomics, focusing on growth, a depreciating yen, and increased governmental spending.
In the wake of Takaichi’s victory, the Japanese yen saw a notable strengthening, trading at 156.88 against the U.S. dollar. Furthermore, yields on 10-year Japanese government bonds increased nearly 4 basis points to reach 2.274%, while yields on 20-year JGBs rose by approximately 3 basis points to 3.158%. Analysts from Crédit Agricole CIB remarked on the strengthened momentum for Takaichi’s administration, noting a public mandate conducive to proactive fiscal policy.
International reactions to the election included a message from U.S. President Donald Trump, who praised Takaichi as a respected leader and highlighted the enthusiastic participation of the Japanese electorate.
Takaichi’s victory arrives against a backdrop of previous political instability, including the LDP’s loss of its Upper House majority last year and subsequent losses in the Lower House in 2024, leading to the resignation of former Prime Minister Shigeru Ishiba.
Other Asian markets followed suit, with South Korea’s Kospi jumping 4.1% to 5,298.04, and the Kosdaq adding 4.3% to close at 1,127.55. Australia’s S&P/ASX 200 increased by 1.85%, ending at 8,870.1, while Hong Kong’s Hang Seng Index was up 1.71%. The CSI 300 index in mainland China rose by 1.63% to 4,719.06, and India’s Nifty 50 added 0.61%. Thailand’s SET Index surged almost 4% after the Bhumjaithai Party achieved a decisive victory in the recent elections.
In the United States, futures saw a slight increase following a significant rebound in stocks, particularly in the technology sector after a rough patch. Last Friday, U.S. stocks surged with the Dow Jones Industrial Average gaining 1,206.95 points or 2.47%, closing above the 50,000 mark for the first time. The S&P 500 rose by 1.97% to end at 6,932.30, while the Nasdaq Composite jumped by 2.18% to 23,031.21, marking a recovery for the tech-heavy index despite a 0.1% decline for the week. The Dow experienced a 2.5% increase week-to-date, partly due to a rotation towards more economically cyclical stocks, even as the overall market experienced tech-related pressures.
