Japan's ruling Liberal Democratic Party (LDP) elected Sanae Takaichi as its new party leader on Saturday, positioning her to potentially become Japan's first female prime minister. Following this development, Japanese stock markets rallied significantly on Monday, with the Nikkei 225 index surging over 4% to reach an all-time high.
The morning session gains were led by real estate, technology, and cyclical consumer stocks. Notably, Nippon Steel's share price jumped 13%, while Mitsubishi Heavy Industries and Kawasaki Heavy Industries rose 11% and 10.47%, respectively.
Credit Agricole's investment division noted in a weekend report following the election results that given the Japanese government's "high-pressure economy" policy orientation, Takaichi may likely request the Bank of Japan to maintain accommodative monetary policy. The bank added that Takaichi might be open to the BOJ raising interest rates by 25 basis points before January 2026.
The report also stated: "The Takaichi administration recognizes that Japan's current economy remains sluggish and is expected to completely shift policy direction, introducing new strategies (comprehensive reforms) to expand investment and demand through public-private partnership models."
Similarly, the Topix index also gained over 3%, reaching a record high.
The Japanese yen came under pressure and weakened, falling 1.45% against the US dollar to trade at 149.59 yen per dollar. Japan's 30-year government bond yields rose over 10 basis points to 3.263%, while 20-year yields increased more than 6 basis points to 2.674%. The benchmark 10-year government bond yield remained relatively unchanged at around 1.659%.
