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Japan’s Nikkei 225 traded at 56,363.94 in late afternoon, up 3.89%, after earlier crossing the 57,000 mark for the first time in its history. The index added more than 2,100 points in a single session, extending a powerful rally that pushed it to its day’s and 52-week high of 57,337.07.
Source: Yahoo Finance
The surge followed confirmation of a decisive election victory for Prime Minister Sanae Takaichi. Investors responded quickly. Who wanted to stay on the sidelines?
Election Result Delivers Decisive Mandate
Prime Minister Takaichi secured a landmark win after her Liberal Democratic Party captured a two-thirds supermajority in the 465-seat lower house, according to public broadcaster NHK. The LDP won 316 seats, while coalition partner Japan Innovation Party added 36 more, taking the alliance total to 352 seats.
No single party has achieved such dominance since Japan’s parliamentary system took its current form in 1947. The result handed Takaichi firm control of the legislative agenda.
Broader Market Joins the Rally
The rally extended beyond the Nikkei. The Topix index advanced more than 3% and also set a record high, showing broad-based buying across Japanese equities. Other Asian markets followed higher as regional investors reacted to Japan’s political clarity.
Equity desks across the region pointed to strong opening flows into Tokyo-listed stocks. The strength suggested confidence rather than caution.
The “Takaichi Trade” Drives Momentum
Japanese equities have not waited for election night to price in this outcome. Markets have rallied for months on what traders call the “Takaichi trade.” Investors expect her policies to follow a growth-focused path that echoes Abenomics.
Analysts link the surge to expectations of strategic investment, tax reform, and looser monetary conditions. Sree Kochugovindan of Aberdeen Investments described a decisive win as the best medium-term scenario for markets. The price action reflected that view.
Takaichi told reporters she plans to pursue a “responsible yet aggressive” fiscal policy and intends to keep her cabinet unchanged. This stance signaled continuity at a time when investors often fear disruption. Her victory allows the government to push through reforms without lengthy negotiations with opposition parties. Markets often crave certainty. This result delivered it in full.
Economy Faces Deep Structural Challenges
Despite the rally, Japan’s economic backdrop remains complex. Voters raised concerns about rising grocery prices and rent during the campaign. Low inflation has historically shaped Japan’s economy, yet recent cost pressures have hit households hard. The country also faces an ageing population, a shrinking workforce, and rising social care costs.
Takaichi has pledged tax cuts and higher spending, while questions around funding and public debt remain unresolved.
Political Contrast Sharpens Market Reaction
Takaichi’s success stands out sharply against recent history. Her predecessor Shigeru Ishiba lost the LDP’s parliamentary majority amid scandals and voter frustration. Takaichi called a snap election just months after taking office in October, betting on her personal appeal.
She consolidated conservative support while attracting younger voters through an unexpectedly modern public image. Markets appeared to reward the political reset.
Global Attention Turns to Tokyo
International leaders reacted quickly. US President Donald Trump congratulated Takaichi on her victory, calling it an honor to have endorsed her. She plans to travel to Washington in March for a second meeting with Trump.
Investors now watch how diplomacy, fiscal plans, and monetary policy align in the months ahead. For now, Japanese equities have delivered their verdict, and it came with force.
