Japan’s stock market surged to record highs as the Takaichi premiership became imminent. Investors reacted positively to the formation of a new political coalition.
The Nikkei 225 Index jumped 3.4% to close at 49,185.50, while the broader Topix rose 2.5%. Benchmark Japanese government bonds fell, pushing yields higher.
This rally followed Takaichi’s win in the Liberal Democratic Party (LDP) leadership run-off earlier this month. However, a rift with a long-time coalition partner prompted her to seek support from the Japan Innovation Party, Ishin.
On Monday, Ishin’s leadership agreed to form a coalition with the LDP, confirming they would support Takaichi in Tuesday’s parliamentary vote. Taylor Nugent, senior economist at National Australia Bank, said the opposition is unlikely to unify, clearing Takaichi’s path to the premiership.
Market activity reflected strong confidence, with 217 Nikkei stocks advancing against seven decliners. SoftBank Group surged 8.5%, while industrial robot makers Yaskawa Electric and Fanuc gained 7.2% and 6.5%, respectively.
Nomura Securities strategist Fumika Shimizu noted the Nikkei’s rally is fueled by expectations that the Takaichi premiership will implement stimulus policies. She suggested the index may soon test the 50,000 psychological threshold.
Meanwhile, Japanese government bonds remained volatile. Short-term yields rose after central bank board member Hajime Takata reiterated support for resuming interest rate hikes. The five-year yield increased 5 basis points to 1.24%, while the 10-year yield rose 4.5 basis points to 1.670%.
Longer-term bonds experienced limited gains, with the 30-year yield edging down 0.5 basis points to 3.115% and the 40-year yield dropping 1.5 basis points to 3.405%.
Economists cautioned that Ishin’s support may not extend to cabinet decisions, potentially limiting Takaichi’s stimulus scope. Yusuke Matsuo of Mizuho Securities noted that market expectations might be overly optimistic.
The biggest loser on the Nikkei was Ryohin Keikaku, down 2.5%, after the Muji store operator suspended online shopping due to a cyberattack on a logistics partner.
Overall, the Takaichi premiership is driving strong market confidence, signaling investor optimism for fiscal stimulus and political stability.
