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(Bloomberg) — Japanese stocks gained the most since April as Prime Minister Sanae Takaichi’s historic win in Sunday’s election ignited expectations of more government spending in key industries.
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The Nikkei 225 benchmark jumped as much as 5.7% to a fresh record of 57337.07 as of 10 a.m. local time, with the broader Topix also up as much as 3.4% to a new peak. Tech and machinery led the climb, with some chip-gear makers rising over 10%.
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Takaichi’s ruling coalition secured an overwhelming majority in Sunday’s lower-house vote, giving her a clear mandate to pursue fiscal expansionary policies that have already driven Japanese stocks to record highs. Sectors seen benefiting from her “strategic” spending plans, including AI, semiconductors, quantum computing and defense, have powered the climb and were among Monday’s best performers.
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Takaichi’s win “far surpassed” initial expectations, and “has the potential to open the floodgates on her expansionary policies,” wrote Andrew Jackson, head of Japan equity strategy at Ortus Advisors, in a note. He expects upside for defense-related stocks like Mitsubishi Heavy Industries Ltd., as Takaichi has pledged to increase security spending, along with space-related names.
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Financial stocks will also win out due to higher long-term bond yields, he added, while food-linked shares may benefit from Takaichi’s election promise of a temporary cut to the consumption tax on food.
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Defense manufacturers Mitsubishi Heavy, Kawasaki Heavy Industries Ltd. and IHI Corp. were all strong Monday, with IHI gaining as much as 7.2%. Satellite firm Sky Perfect JSAT Holdings was among the Topix’s best performers, while real estate and construction stocks, also expected to benefit from Takaichi’s policies, were also solid.
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The ruling Liberal Democratic Party’s “historic victory gives Prime Minister Takaichi a stable majority, reducing coalition constraints and enabling decisive action on fiscal stimulus, AI, semiconductors, energy security, and strategic reforms,” said Marc Jocum, senior investment strategist at Global X Management. “Markets now have a clear fiscal policy runway through 2028 until the next election.”
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Chip-gear maker Advantest Corp. was the biggest contributor to the Topix’s gains Monday, rising as much as 15%. Expectations of more AI investment from big tech firms following Amazon.com Inc.’s earnings on Friday are an extra tailwind for Japan’s semiconductor sector “on top of the Takaichi upside,” said Ortus’ Jackson.
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—With assistance from Carmeli Argana.
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English (US)