TOKYO, Oct 20 – The Nikkei stock index surged over 3 percent to end at an all-time high on Monday, with a coalition agreement making ruling Liberal Democratic Party head Sanae Takaichi certain to become Japan’s new prime minister, ending days of political uncertainty.
The 225-issue Nikkei Stock Average ended up 1,603.35 points, or 3.37 percent, from Friday at 49,185.50. The broader Topix index finished 78.01 points, or 2.46 percent, higher at 3,248.45.
On the top-tier Prime Market, gainers were led by bank, information and communication and rubber product issues.
The U.S. dollar briefly rose to the lower 151 yen range in the morning as the yen was sold on growing concern over the deterioration of Japan’s fiscal health under Takaichi, a proponent of fiscal expansion, likely to be elected prime minister on Tuesday.
The U.S. currency lost ground later in the day to the lower 150 yen zone at one point after a hawkish Bank of Japan board member called for resuming interest rate hikes, saying “now is a prime opportunity” as concerns over higher U.S. tariffs receded.
The stock market reacted positively to the perceived political stability from Takaichi’s expected election as prime minister in a parliamentary vote following the signing later Monday of a coalition deal between the LDP and major opposition party Nippon Ishin.
Stocks jumped after losing ground last week on speculation that the Komeito party’s decision to end its coalition with the LDP could prevent Takaichi, who became LDP president on Oct. 4, from becoming Japan’s premier.
“The market has factored in the expected launch of the government led by Ms. Takaichi,” said Yutaka Miura, senior technical analyst at Mizuho Securities Co., adding that some more buying could take place when she is actually elected as premier.
Investor sentiment was also lifted by easing concerns over U.S.-China trade tensions after U.S. President Donald Trump said in a television interview aired Friday that the 100 percent additional tariffs on China he had threatened to impose from November are “not sustainable,” brokers said.
The online talks on Friday between U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng, held ahead of a planned meeting between their countries’ presidents, also further fueled hopes for an improvement in bilateral ties, they said.
Going forward, the market is expected to take a wait-and-see stance on how the Takaichi government will steer fiscal and economic policies in coordination with Ishin, which has emphasized stabilizing the country’s fiscal health, analysts said.
Fumika Shimizu, a strategist in the Investment Content Department at Nomura Securities Co., said the need for alignment with Ishin may dampen expectations for Takaichi to pursue aggressive fiscal expansionary policies.
