In the early trading session on Tuesday, January 13th, the Tokyo Stock Market surged strongly. The Nikkei Stock Average Index (also known as the Nikkei 225 Index) continued its significant rise, breaking through the historic 53,000-point mark for the first time, reaching a peak of around 53,700 points during the trading session. This marked an increase of over 1800 points from the previous trading day’s close, setting a new all-time high.
Simultaneously, the Tokyo Stock Price Index (TOPIX), reflecting the overall market performance, also surged by over 2% in the early session, rewriting a new historical high intraday.
The catalyst for this market movement comes from the latest developments in the Japanese political arena. Several Japanese media outlets reported that Prime Minister Takaichi Sanae has begun discussions on dissolving the Lower House in the upcoming regular session of the Diet on January 23rd, with a possible general election to be held as early as February.
Since the formation of the Takaichi Cabinet by the Liberal Democratic Party and Nippon Ishin no Kai coalition government in October last year, it has maintained high approval ratings. However, while the Lower House barely secures a majority, the Upper House has yet to reach a majority, leading to a “distorted Diet” situation.
The market widely interprets that an early election will help consolidate the ruling foundation, accelerate policy implementation, and potentially lead to more expansionary fiscal policies, thus stimulating increased investment in the Japanese stock market.
Anticipating the impact of expansionary fiscal policies, the Japanese Yen weakened in the foreign exchange market, depreciating to around 158 yen against the US dollar, nearing a low point in the past year.
The weakening yen has boosted the profit outlook for export-oriented companies, driving a broad rally in automotive and electronic stocks. Companies like Toyota Motor excelled among export-oriented sectors. Semiconductor equipment stocks also gained attention, with Advantest and Tokyo Electron seeing significant price increases. Tokyo Electron, in particular, reached a new high for the first time in almost two years.
In contrast, certain domestic demand and entertainment-related stocks showed weaker performance, with companies like Sony Group, Nintendo, Nitori Holdings, and Seven & i Holdings experiencing declines.
The external environment also provided support for the Japanese stocks. During the market holiday on the 12th, the US stock market continued to rally, with the Dow Jones Industrial Average and the S&P 500 Index hitting new all-time highs. The tech-heavy Nasdaq Index also maintained its strength. The demonstration effect of record highs in the US market strengthened global investors’ willingness to allocate funds to risk assets, making Japanese stocks the most prominent beneficiaries in the Asian markets.
(Adapted from reports by Nikkei Economic News)