TOKYO: Japanese stocks swept to record peaks while bonds slid and the yen sagged to an all-time low against the Swiss franc after Prime Minister Sanae Takaichi scored a landslide win in Sunday’s (Feb 8) snap election.
Takaichi’s Liberal Democratic Party won 316 of the 465 seats in parliament’s lower house, giving her the mandate to push through her big spending plans and promised tax relief without negotiating with other parties. The so-called supermajority also allows the LDP to pass legislation without upper house approval.
The Nikkei 225 share average rallied 5.7 per cent to an unprecedented 57,337.07 by 01.46am GMT (9.46am, Singapore time). Of its 225 components, 197 rose while the rest fell, underscoring the breadth of the upsurge.
The broader Topix advanced 3.4 per cent to a record 3,825.67.
Heavyweight chip-testing equipment maker Advantest, a supplier to Nvidia, vaulted more than 13 per cent to be the Nikkei’s top performer, leading a rally among shares linked to artificial intelligence.
The market “sees greater momentum for Prime Minister Takaichi’s policy agenda”, particularly her fiscal policy, said Shingo Ide, chief equity strategist at NLI Research Institute.
“It’s not just a stable administration – What’s coming into view is the prospect of a long-term administration.”
For the Nikkei though, “I don’t think it will keep rising at this pace. If it were to shoot straight to 60,000, that would be a bit overdone,” Ide said, adding that it may eventually “settle down” around 56,000.
ELECTION MANDATE PUTS SHARP FOCUS ON FISCAL PLAN
Japanese government bond yields rose, with short-term yields reaching a three-decade peak. But the longest-dated bonds, which are most sensitive to fiscal worries, were little changed on the day after erasing an initial spike higher in yield.
Bond yields move inversely to prices.
Two-year JGB yields climbed 2.5 basis points (bps) to the highest since May 1996 at 1.3 per cent, and 10-year yields jumped 4 bps to 2.27 per cent.
Thirty-year JGB yields climbed as much as 6.5 bps to 3.615 per cent, but were last down 0.5 bp at 3.545 per cent.
“I think the reaction indicates that Takaichi has successfully convinced the market that she will be a strong leader, but not be a fiscally irresponsible one,” said Zuhair Khan, a senior portfolio manager at UBP.
“But we will have to wait and see.”
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