Japan’s parliament elected Sanae Takaichi as the country’s first female prime minister, as Tokyo stocks hit a record high on investor optimism over her government’s policies.
The benchmark Nikkei 225 Average jumped 1.5 percent on Tuesday to more than 49,900 points, close to the all-time high of 50,000. The index is up more than 26 percent this year.
Takaichi won 237 MP votes out of the 465 seats in the lower house on Tuesday, following a decisive coalition deal reached by his Liberal Democratic Party 24 hours earlier.
His new ruling coalition is expected to discuss increased defense spending, possible tax cuts and consider restarting Japan’s suspended nuclear power plants.
Sources close to the LDP said Takaichi, a former television presenter and deep admirer of Margaret Thatcher, was close to appointing Satsuki Katayama, a former economic revitalization minister, as the country’s first female finance minister. Takaichi is also likely to build a cabinet with a record number of women.
The yen continued to trade weak against the U.S. dollar, falling below the ¥151 level on bets that the Bank of Japan may delay raising interest rates at next week’s policy meeting.
The stock market euphoria followed Monday’s signing of a coalition agreement between the LDP, which has ruled Japan for most of the past 70 years, and the reformist Japan Innovation party, founded 15 years ago, which captured a significant number of parliamentary seats around Osaka.
Hirofumi Yoshimura, Osaka governor and JIP co-chairman, said after the parliamentary vote that “Prime Minister Takaichi’s fervent desire to truly improve Japan has come through very clearly… We are not timid in our approach, and this shared belief has brought us together.”
The formation of the LDP-JIP coalition follows the collapse this month of the LDP’s 26-year-old coalition with the Komeito party. Komeito shared many policy goals with the LDP, but often held back major initiatives.
Tomochika Kitaoka, chief equity strategist at Nomura Securities, said that although Japanese stocks were part of a global stock rally, the so-called Takaichi trade was a powerful driver.
He said the JIP was largely aligned with the LDP on the need to spend more on defense and restart Japan’s nuclear reactors, most of which have been shut down since the 2011 tsunami and Fukushima nuclear disaster.
Analysts say the Takaichi trade has evolved in recent weeks and is now fueled by expectations of a stable administration and economic structural reforms, in addition to stimulus spending.
The JIP “is considered pro-growth, like Takaichi,” Kitaoka said. “The balance of power will be difficult for her to manage in the future, but when it comes to defense and energy, the new prime minister will likely have an easier time implementing policies with this new coalition than with Komeito. »
Neil Newman, a strategist at Astris Advisory, said that given the strong interest in Japanese stocks from foreign investors, he had raised his year-end target for the Nikkei 225 to 51,500.