Japanese stocks soared to a record high on Monday after Prime Minister Sanae Takaichi secured a landslide election victory, marking a historic mandate for her Liberal Democratic Party and igniting investor optimism. The Nikkei 225 index surged over 5% in early trading, briefly crossing the 57,000 mark for the first time, before closing up 3.9% at 56,363.94, as markets reacted to the political certainty brought by Takaichi’s win.
The rally followed Sunday’s election, where Takaichi’s LDP won 316 out of 465 seats in the lower house, with its coalition partner, the Japan Innovation Party, adding 36 more seats for a total of 352. This gives the ruling coalition a two-thirds supermajority, the first time a single party has achieved such a majority since Japan’s parliament was established in its current form in 1947. The decisive victory represents a dramatic turnaround for the LDP, which had lost its parliamentary majority under previous leaders amid corruption scandals and economic challenges.
Takaichi, Japan’s first female prime minister, called the snap election last month to consolidate power after taking office in October, and her success is seen as a gamble that paid off. She has pledged to pursue a “responsible yet aggressive” fiscal policy, including tax cuts, increased spending on strategic sectors like defense and artificial intelligence, and an end to austerity measures. Market analysts say these policies could boost Japan’s moribund economy, with investors expressing confidence that Japanese firms will benefit from her growth-oriented agenda.
However, the jubilant stock market response contrasts with concerns among bond and currency investors, who are skeptical about how Takaichi plans to finance her spending given Japan’s high government debt. The yen weakened and bond yields fluctuated, reflecting worries that her policies might deepen fiscal instability. Historically low inflation in Japan has made the country sensitive to rising living costs, and voters at polling stations cited worries about grocery prices and rent as key issues in the election.
The election took place against a backdrop of an ageing population and sluggish economic growth, which have strained Japan’s social care systems and workforce. Takaichi has vowed to address these challenges through economic revitalization, but critics warn that her plans could exacerbate debt levels. She emphasized that her party bears a “heavy responsibility” to deliver on campaign pledges, as reported by Kyodo News.
Internationally, U.S. President Donald Trump congratulated Takaichi on her victory, having endorsed her ahead of the election, which is rare for a U.S. president. Takaichi is scheduled to travel to Washington in March for a second meeting with Trump, highlighting strengthening bilateral ties. Her diplomatic debut last October, when Trump visited Japan, was marked by public displays of support, and future engagements are expected to focus on economic and security cooperation.
Looking ahead, Takaichi faces the challenge of implementing her pro-business policies while managing fiscal constraints and addressing voter concerns about cost-of-living. Her ability to steer Japan’s economy through reforms will be closely monitored by domestic and international observers, with the stock surge signaling initial market confidence in her leadership.
