Monday witnessed an extraordinary rally in the Japanese stock market, punctuated by the Nikkei 225 surpassing the unprecedented threshold of 57,000 points intraday. This milestone coincided with the recent electoral triumph of Prime Minister Sanae Takaichi, whose Liberal Democratic Party (LDP) secured a commanding majority in the Lower House election held on Sunday. The landslide victory, augmented by a public endorsement from former U.S. President Donald Trump, has energized investor confidence and driven markets upward.
The Nikkei 225 closed the trading day at 56,568.24, reflecting a 4.27% increase from prior levels. Earlier, the index attained a peak of 57,337.07 points during intraday trading, marking a record high. The bold market movements follow parliamentary elections wherein the LDP claimed 316 seats out of 465 in the Lower House. Alongside coalition partner the Japan Innovation Party, the bloc commands a supermajority of 352 seats, representing more than two-thirds of the assembly.
This political dominance furnishes Takaichi with a robust mandate to implement her planned economic policies, collectively dubbed “Sanaenomics.” These are anticipated to include aggressive reflationary strategies aimed at stimulating growth, as well as enhancements to Japan's defense spending, reflecting a more assertive posture in regional security matters.
The market's robust reaction was further intensified by international political support. Donald Trump took to social media following the election results to congratulate Prime Minister Takaichi. He characterized her as "a highly respected and very popular leader," commending her boldness in calling a snap election as a strategic move that yielded significant gains. Trump's message included a reiteration of his previous "complete and total endorsement" and expressed optimism for her success in advancing a conservative agenda centered on "Peace Through Strength."
Prime Minister Takaichi responded emphatically to the endorsement, highlighting the enduring significance of international partnerships. She underscored the lasting presence of the Trans-Pacific Partnership and described the alliance and friendship between Japan and the United States as rooted in deep trust and close cooperation, suggesting that this bond underpins future policy and market stability.
The electoral outcome and ensuing market enthusiasm also resonated across Asia. The South Korean KOSPI index advanced by 3.62%, while Taiwan's weighted index saw gains of 2.3%. These increases reflect regional investor optimism possibly tied to anticipated economic shifts in Japan and broader geopolitical dynamics.
Despite equity gains, bond market indicators signaled a more cautious tone. Yields on 10-year Japanese Government Bonds (JGBs) climbed to 2.28%, driven by market participants' expectations of significant fiscal stimulus measures that may accompany Takaichi’s policy agenda.
While the government’s supermajority reduces legislative obstacles for economic reforms—including proposed tax cuts—the Japanese yen experienced depreciation, weakening to ¥156.62 against the U.S. dollar as of Monday morning. This currency movement reflects a complex interplay of factors, including anticipated monetary conditions and inflationary measures.
Meanwhile, markets across the Pacific displayed positive sentiment as well. U.S. futures rose on Monday following a favorable close on Friday for major indexes. The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index, increased by 1.92% to $690.62, while the Invesco QQQ Trust ETF (QQQ), tracking the Nasdaq 100, advanced by 2.11% to $609.65.
The confluence of political stability, strategic international endorsements, and favorable market momentum positions Japan at a pivotal moment. However, market observers remain attentive to potential shifts in fiscal and monetary policy execution, currency fluctuations, and regional economic interdependencies as these factors continue to evolve.