Japan’s stock market surged to historic heights on Monday as Sanae Takaichi’s election as leader of the ruling Liberal Democratic Party boosted investor confidence.
The Nikkei 225 jumped nearly 5%, closing above 47,900 for the first time ever, on expectations that Takaichi will pursue expansive fiscal stimulus and maintain loose monetary policy. This positions her to become Japan’s first female prime minister.
Takaichi is known as a fiscal dove who supports aggressive government spending and a continuation of the Bank of Japan’s accommodative stance. Her approach, reminiscent of former Prime Minister Shinzo Abe’s “Abenomics,” aims to stimulate growth by expanding public-private investment and supporting demand.
Sectors including technology, real estate, and heavy industry led the gains, with companies such as Yaskawa Electric and Japan Steel Works seeing sharp rises.
At the same time, the yen weakened sharply, slipping past the 150 mark against the U.S. dollar for the first time since August, reflecting market expectations of further monetary easing and subdued rate increases under her leadership. This prompted concerns from Japanese officials, recalling past currency interventions following steep depreciation.
The bond market responded with rising long-term yields as investors priced in a shift toward more stimulus and potential interest rate hikes in the medium term. Despite inflation persistently above the Bank of Japan’s 2% target, wage growth remains sluggish, complicating the effort to end decades of deflation. Takaichi’s strategy seeks to boost wages and investment to break this cycle.
Regionally, Australia’s market was flat and Hong Kong’s indices fell slightly, while Japan’s neighbours marked holidays. In the U.S., major indexes ended the week with modest gains amid a government shutdown.
Takaichi’s victory marks a new chapter for Japan’s economic policy, combining hopes for stronger fiscal support and growth with worries over currency volatility and bond market reactions.