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Japan’s stock market has hit a record high after Sanae Takaichi’s Liberal Democratic party (LDP) secured a comprehensive victory in Sunday’s election.
The LDP won 316 of the 465 seats in the country’s lower house – the first time a single party has secured two-thirds of the lower house since the establishment of Japan’s parliament in 1947.
The Japan Innovation party, the LDP’s coalition partner, won 36 further seats, giving a supermajority of 352 seats.
The landslide victory eases the legislative agenda for Takaichi – who is Japan’s first female prime minister and called a snap election in January – as she can override the upper chamber, which she does not control.
Japanese stocks rose, bonds fell and the battered yen recovered some ground on Monday after the LDP’s win was seen as enabling decisive action on fiscal stimulus.
Japan’s Nikkei share average rose to a record high on Monday, after the election results, surpassing the 56,000 level for the first time at the start of trading. It quickly pushed through the 57,000-point mark, before closing up 3.9% at 56,363 points.
In other Asian markets, South Korea’s Kospi rose 4.4%, Hong Kong’s Hang Seng gained 1.8%, and Australia’s S&P/ASX 200 was 1.9% higher.
On the currency markets, the yen initially fell 0.3% against the dollar – its weakest level in two weeks – before strengthening as much as 0.7%. It was last trading 0.5% firmer at 156.43 yen against the dollar.
Takaichi hopes to push through a 21tn yen (£99bn) stimulus package, and has promised to suspend Japan’s 8% sales tax on food for two years.
Investors have balked at the lack of clarity over how Japan, which has the highest debt burden in the developed world, would fund the proposal. The uncertainty has triggered a sell-off in government bonds and pushed the yen towards historic lows against other currencies.
Some analysts had suggested that Takaichi’s strong mandate might give her leeway to retreat from the plan, with opposition parties advocating even bolder tax cuts suffering heavy defeats at the ballot box.
But the premier pushed back against that view in a series of brief television interviews as results rolled in on Sunday, saying she would move with speed to realise the LDP’s promise to suspend the levy.
“While the initial yen weakness may not have played out, the outlook for the yen is still one which is likely to struggle to strengthen,” said Sim Moh Siong, a currency strategist at OCBC in Singapore.
“At least in the near term, there’s also concern about intervention risk, which may be capping the upside for dollar-yen.”
Japan is concerned about the rapid moves in foreign exchange markets and is closely monitoring them with a high sense of urgency, a top government spokesperson, Minoru Kihara, told a press conference on Monday.
The challenge for Takaichi is finding revenue to offset the tax suspension, which would cost about 5tn yen a year – roughly equivalent to Japan’s annual education budget.
She has ruled out issuing fresh debt but has remained vague on alternative funding sources, saying details would be worked out through cross‑party debates on social welfare and taxation.
Reuters contributed to this report
