Takaichi's Victory Leads to Historic Rise in Japanese Stock Markets

Historic Stock Market Surge in Japan

The definitive victory of Japanese Prime Minister Sanae Takaichi has led to an impressive surge in the stock market. At the opening of trading on Monday, the Nikkei 225 index rose by 5.7%, surpassing the 57,000 points mark for the first time. Similarly, the broad market indicator, the Topix index, also crossed the 3,800 level, reaching its highest point in history. This tremendous rise was significantly influenced by the government's growth-oriented incentives and increasing investment expectations for companies.

Super Majority: Expectations of Political Continuity and Strong Governance

The ruling Liberal Democratic Party (LDP) secured 316 of the 465 seats in the House of Representatives, achieving a total of 352 seats with its coalition partner Ishin. This situation strengthens the perception that the legislative process will accelerate and political continuity will be reinforced. Market participants have begun to price in a decrease in short-term political risks and long-term management expectations.

Rise in Technology and Defense Sectors

Takaichi's identification of artificial intelligence, semiconductors, and the defense industry as strategic sectors has led to an increase in sector-specific stocks. Advantest showed significant growth in chip testing equipment, while in the defense sector, Mitsubishi Heavy Industries and IHI stood out with strong buying demand. Expert analysts express that these policies could increase foreign investments and raise valuations in certain sectors.

Takaichi Trade: A New Investment Theme

The new theme referred to as “Takaichi trade” represents the simultaneous pricing of growth-oriented incentives and public supports provided by the super majority. In this context, taking positions in companies with high financial efficiency and querying capital expenditure plans is coming to the forefront.

Impact of Tax Policy and External Fluctuations

Messages such as consumption tax reductions or suspensions aimed at encouraging households are increasing questions about the financial architecture. Experts warn about the potential of the yen approaching the 160 band against the dollar. On the first trading day, the yen remained steady at around 156.50, while the yields of 10-year Japanese Government Bonds (JGB) showed a limited increase.

Foreign Policy Developments and Constitutional Discussions

The continuation of Japan's security cooperation with Washington and the leaders' summit planned for March support expectations for increased defense spending. Additionally, Takaichi’s planned discussions regarding the 1947 Constitution are being closely monitored by the markets. However, uncertainties arising from the political process may take time due to both upper house arithmetic and potential referendum requirements.

Expert Opinions and Risks

Market strategists agree that while the election results have provided a strong start, the details of the policies to be implemented will be more decisive for future developments. The permanence of corporate governance reforms and efforts to increase financial depth will have significant effects on market pricing.