Japanese shares surged to a record high after Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) secured a decisive victory in the country’s general election, strengthening expectations of fiscal stimulus and tax cuts.
The LDP won 316 of the 465 seats in the lower house, while its coalition partner added further seats, giving the ruling bloc a two-thirds supermajority. The result gives Takaichi, Japan’s first female prime minister, strong legislative control and the ability to push through policy measures with limited opposition.
Markets reacted positively to the clear mandate. The Nikkei index climbed to an all-time high, rising nearly 4% to close above 56,000 points. Gains were also seen across other Asian markets, reflecting improved regional sentiment.
Investors anticipate swift action on stimulus spending and a proposed suspension of the sales tax on food. However, concerns remain over how these measures will be funded, given Japan’s high public debt levels. Uncertainty around financing plans has already led to a sell-off in government bonds, pushing yields higher.
The yen showed mixed movement, initially weakening before recovering some ground, as currency markets weighed the prospects of increased government spending against fiscal risks.
While the election outcome gives Takaichi political strength, analysts say financial markets will closely scrutinize her economic agenda. Bond and currency markets are expected to act as a key check on policies seen as overly ambitious or inflationary.
