Japan’s Nikkei 225 index has surged beyond 51,000 for the first time, rising more than 1% thanks to optimism over U.S.-Japan trade relations, recent advances in the artificial intelligence industry, and expectations of further Federal Reserve interest rate cuts.
The rise follows the signing of a rare earths trade agreement between U.S. President Donald Trump and Japan’s newly appointed Prime Minister Sanae Takaichi. This was Trump’s first meeting with Takaichi since she assumed office earlier this month; he also met Emperor Naruhito at the Imperial Palace.
Takaichi’s leadership is expected to shift the Liberal Democratic Party towards policies that are economically liberal, socially conservative, and assertive on national security, according to FitchSolutions’ GeoQuant.
Investor sentiment was lifted further by key tech companies announcing major AI initiatives, including Nvidia and Microsoft. Despite headwinds from a stronger yen, Nikkei heavyweights like Advantest and Lasertec posted strong gains.
Markets are almost unanimously expecting the Federal Reserve to cut interest rates by another 25 basis points, potentially dropping the federal funds rate to between 3.75% and 4.00%. As Louis Navellier observed, “If [Fed chair Jerome Powell] comes off dovish, bets for future Fed cuts will increase and provide more fuel to market momentum.”
Regionally, Japan’s Topix index remained steady, South Korea’s Kospi edged up slightly, while the Kosdaq retreated. Australia’s S&P/ASX 200 saw a small decline amid reports of a 3.2% rise in consumer prices in the third quarter, the highest in over a year.
China’s CSI 300 index rose 0.37%, with Hong Kong markets closed for holidays. In the U.S., all major indices closed higher, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all reaching new highs, reflecting strong technology sector performance and optimism ahead of Fed policy decisions.