Market Reaction To Election Result
Japanese stocks rose to a record high on Monday after Prime Minister Sanae Takaichi’s Liberal Democratic Party secured a decisive election victory. The Nikkei 225 index jumped more than 5% in early trading and briefly crossed 57,000 for the first time before giving up some gains. It still closed up 3.9% at a record 56,363.94.
The rally followed Sunday’s election result, which gave the LDP 316 of the 465 seats in the lower house. It marked the first time a single party has won a two-thirds majority since Japan’s parliament took its current form in 1947. The Japan Innovation Party, the LDP’s coalition partner, won 36 more constituencies, bringing their combined total to 352 seats.
Political Mandate And Policy Direction
The scale of the victory allows Takaichi to push through pro-business policies with limited need to negotiate with opposition parties. She told reporters on Sunday that she would pursue what she called a “responsible yet aggressive” fiscal policy and said she would not reshuffle the cabinet, which was formed less than four months ago.
Takaichi called the snap election last month, only a few months after taking office in October. Her win contrasts with the record of her two predecessors, under whom the LDP lost its parliamentary majority, faced corruption scandals, and struggled to rein in rising costs.
Investor Views And Market Segments
Market commentators said the outcome and expected policy steps could support equities. Investment analyst Yuka Marosek told the BBC that the result and measures such as stimulus, tax changes, and deregulation would add to what she described as an existing bull trend. Chris Scicluna, head of research at Daiwa Capital Markets Europe, said Japanese equity investors had long supported Takaichi, citing confidence in her pledge to end austerity, her plans for more investment, and her focus on sectors such as defence and AI.
He added that investors in Japanese government bonds and the yen were more cautious. He said government debt remains very high and that bond and currency investors want clarity on how her plans would be funded.
Economic Pressures And Voter Concerns
Japan has seen historically low inflation, which has made recent increases in living costs more noticeable. Voters told the BBC at polling stations that they were worried about higher prices for groceries and rent. The economy is also under pressure from an ageing population, which has reduced the size of the workforce and increased social care costs.
Takaichi has pledged to cut taxes and increase spending to support growth, though questions remain about funding given the level of government debt. Critics have said the approach could add to economic instability. As her party’s victory became clear, she was quoted by Kyodo as saying that the government bears a heavy responsibility to deliver on its campaign promises.
Regional Competition And Earlier Tariffs
The new U.S. tariff position puts Japan close to regional competitor India in terms of trade pressure, and both countries compete in exports such as clothing, footwear, and agricultural goods. India was initially hit with 25% U.S. duties when reciprocal tariffs were announced in April 2025, while Bangladesh faced a 37% rate at that time.
Public Image And International Response
Takaichi has consolidated support among conservative voters by reviving goals such as revising Japan’s pacifist constitution and by stressing traditional values. At the same time, she has drawn attention from younger voters, with items such as her handbags and pink pens becoming widely noted.
U.S. President Donald Trump congratulated her on Truth Social and said it was an honor to have endorsed her before the election. He said the people of Japan would have his support. One week after she took office last October, Trump visited Japan, marking her first major diplomatic appearance, which included a public event with U.S. troops. Takaichi is scheduled to travel to Washington in March for a second meeting with Trump.
Featured image credits: Wikimedia Commons
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