Japan’s Nikkei Set for New High Ahead of Prime Minister Vote

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(Bloomberg) — Japanese stocks climbed Monday on heightened expectations that pro-stimulus Sanae Takaichi will be elected as the nation’s next prime minister. Easing concerns over US-China trade tensions also supported sentiment.

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The blue-chip Nikkei 225 rose as much as 2.9% to beat its previous all-time intraday high set earlier this month, and was trading at 48,922.27 as of 10:47 a.m. in Tokyo. The broader Topix Index also gained as much as 1.9%, lifted by electronics and banks. 

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Takaichi, leader of Japan’s ruling Liberal Democratic Party, is broadly on track to become the next premier, after an NHK report that Osaka-based opposition group the Japan Innovation Party (Ishin) has effectively agreed to form a coalition with the LDP. Takaichi is almost guaranteed to become prime minister with Ishin’s support.

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While some analysts speculate the so-called Takaichi trade — buying Japanese stocks, while selling domestic bonds and the yen — is losing momentum, the heightened likelihood of her victory is boosting sentiment on Monday. 

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Read: Japan’s Ishin to Decide Today on Coalition With Takaichi’s LDP

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“Expectations of a Takaichi administration have risen, and that’s fueling stock buying on hopes of her proactive fiscal policies,” said Yutaka Miura, senior technical analyst at Mizuho Securities.

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Takaichi touted plans to inject more government spending into strategic industries like defense, tech, cybersecurity and nuclear energy during her campaign for LDP head. 

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Cybersecurity firm FFRI Security Inc. soared as much as 23% on Monday morning, with nuclear-related firms Sukegawa Electric Co. and Toyo Tanso Co. also outperforming. 

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Read: Japan Defense, Nuclear Bets Shine for LDP-Led Bloc: Taking Stock

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A cooling in US-China trade tensions also helped power Japanese stocks higher, after President Donald Trump said the steeper tariffs he’d threatened to impose on Chinese imports wouldn’t be sustainable. “The rise in US stocks Friday is feeding through into Japan,” especially tech stocks, said Mizuho’s Miura. 

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Japanese banking stocks were solid, too, after US regional lenders’ shares bounced back Friday, abating worries over credit problems. 

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“The market seems to be treating US regional bank issues as isolated incidents, as the overall economy hasn’t lost momentum and we’re still expecting Fed rate cuts,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab Co. 

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ADVANCERS

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DECLINERS

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INSIGHTS

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