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Record stock surge follows historic election win
Japanese equities soared to unprecedented levels on Monday after Prime Minister Sanae Takaichi's Liberal Democratic Party secured a commanding two-thirds majority in Sunday's parliamentary vote-the first such supermajority since Japan's current constitutional system began in 1947.
Election results and market reaction
The LDP captured 316 of the 465 seats in the lower house, while its coalition ally, the Japan Innovation Party, added 36 more, bringing the ruling bloc's total to 352. Investors welcomed the outcome, sending the Nikkei 225 up more than 5% in early trading to briefly breach 57,000 points. By the close, the index settled at a record 56,363.94, a 3.9% gain for the day.
Takaichi's economic agenda takes center stage
With opposition parties sidelined, Takaichi now faces the task of reviving Japan's sluggish economy and addressing rising living costs. She told reporters on Sunday that her government would pursue an "aggressive yet responsible" fiscal policy and confirmed no cabinet reshuffle would occur, despite the administration being in place for less than four months.
Takaichi, Japan's first female prime minister, called the snap election last month after taking office in October. Her victory stands in sharp contrast to the struggles of her two predecessors, who lost the LDP's parliamentary majority amid corruption scandals and failed to curb inflation.
Investor optimism and skepticism
Market analysts suggest Takaichi's pro-business policies could further fuel Japan's economic momentum. Yuka Marosek, an investment strategist, described the election outcome and anticipated measures-such as stimulus packages, tax adjustments, and deregulation-as "additional fuel for an existing bull trend."
"Investors have long believed in Takaichi. They're confident Japanese firms will benefit from her pledge to end austerity, her promises of increased investment to spur growth, and her focus on strategic sectors like defense and AI,"
Chris Scicluna, Head of Research, Daiwa Capital Markets Europe
However, Scicluna noted that bond and currency investors remain cautious, questioning how Takaichi plans to finance her spending commitments given Japan's already high government debt.
Voter concerns and economic challenges
At polling stations, voters expressed anxiety over rising grocery and rent prices, while the broader economy grapples with an aging population, a shrinking workforce, and soaring social care costs. Takaichi has pledged tax cuts and increased spending to stimulate growth, but critics warn this could exacerbate Japan's fiscal instability.
"We carry an extremely heavy responsibility to deliver on our campaign promises," Takaichi acknowledged as her party's victory became clear, according to Kyodo News.
Political strategy and international relations
Takaichi's success follows the LDP's loss of its parliamentary majority under her predecessor, Shigeru Ishiba. She revitalized the party's fortunes by appealing to its conservative base with long-stalled goals like revising Japan's pacifist constitution and emphasizing traditional values, while also resonating with younger voters through her personal style.
US President Donald Trump congratulated Takaichi on her victory via Truth Social, calling it an "Honor" to have endorsed her ahead of the election. "The wonderful people of Japan, who voted with such enthusiasm, will always have my strong support," he wrote.
Takaichi's diplomatic debut came just a week after taking office, when Tokyo hosted Trump in a high-profile visit that included a joint appearance with US troops. She is scheduled to meet Trump again in Washington next month.
