Nikkei smashes record as Takaichi’s landslide victory ignites ‘Japan is back’ trade
Election result revives risk appetite after global tumult, as investors anticipate Japan will increase public spending to sustain growth
Stocks in the Asia-Pacific region surged after Takaichi’s Liberal Democratic Party secured a two-thirds supermajority in the 465-seat lower house in the snap election over the weekend, marking the biggest victory for a single party in the country since World War II.
Japan’s Nikkei 225 index surged almost 4 per cent to a record 56,363.94 on Monday, breaking out of a month-long consolidation pattern, as the so-called Takaichi trade gained more momentum. Yields on the nation’s sovereign bonds rose on concerns that more debts would be issued to fund fiscal expansion.
Hong Kong’s Hang Seng Index rose almost 2 per cent, while the mainland’s CSI 300 Index gained 1.6 per cent. South Korea’s Kospi jumped 4.1 per cent and Australia’s S&P/ASX 200 added 1.9 per cent.
“The cross-asset read is straightforward – equities get the sugar hit first,” said Stephen Innes, a managing partner at SPI Asset Management. “A commanding mandate delivers policy continuity, industrial intent and a domestic confidence bid that is easy for large pools of capital to justify. Japan becomes easier to own when the government looks stable and deliberate.”
The result of the snap election injected an additional dose of optimism to Asian stocks at a time when the worst of a global sell-off in risk assets seemed to be over. The Dow Jones Industrial Average wrapped up trading last week by closing at an all-time high, signalling at least a tentative stabilisation in sentiment on equities after a week of brutal sell-offs. The victory by Takaichi’s ruling party may further revive risk appetite among stock traders, who are now scouring for new winners after a rotation out of technology stocks whose business models risk being crippled by artificial intelligence.