Japanese stocks hit a record high on Monday following a historic election win for Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP). The party captured 316 of 465 lower house seats in Sunday’s vote, marking the first time a single party has achieved a two-thirds majority since Japan’s post-war parliamentary system was established in 1947.
The LDP’s coalition partner, the Japan Innovation Party, added victories in 36 constituencies, bringing the combined total to 352 seats. The decisive mandate gives Takaichi significant political leverage to pursue her economic agenda, which includes tax cuts, deregulation, and investment in strategic sectors such as defense and artificial intelligence.
The Nikkei 225 index responded immediately, rallying more than 5% in early trading and briefly surpassing the 57,000 mark. The index ultimately closed 3.9% higher at a record 56,363.94. Analysts said the election outcome bolsters investor confidence in Japan’s growth prospects.
“The election outcome and upcoming moves like stimulus, tax tweaks, and deregulation will be additional fuel for an existing bull trend,” investment analyst Yuka Marosek told the BBC. Chris Scicluna, head of research at Daiwa Capital Markets Europe, added that Japanese stock investors “are confident that Japanese firms will benefit from her pledge to end austerity. They like her promises of more investment to boost growth and her focus on strategic sectors.”
However, uncertainty remains for bond and currency investors. Japan’s government debt is among the highest in the world, and some analysts question how Takaichi plans to finance her ambitious economic plans.
Takaichi, Japan’s first female prime minister, called the snap election just months after taking office in October. She pledged to pursue a “responsible yet aggressive” fiscal policy and indicated she would not reshuffle her cabinet, which was formed less than four months ago.
The prime minister’s personal appeal played a key role in the LDP’s revival. She has consolidated support among the party’s conservative base by emphasizing constitutional revision and traditional values while also attracting younger voters through a distinctive personal style that has made items such as her handbags and pink pens popular cultural symbols.
Takaichi’s victory drew international attention. Former US President Donald Trump congratulated her on Truth Social, saying, “The wonderful people of Japan, who voted with such enthusiasm, will always have my strong support,” highlighting the political and diplomatic visibility of her campaign.
Despite market optimism, voters at polling stations cited concerns over the rising cost of living, including groceries and rent. Japan’s aging population and shrinking workforce add further economic pressures, raising questions about how the prime minister will balance growth-promoting policies with fiscal sustainability.
“We bear an extremely heavy responsibility to focus on steadily delivering on the campaign pledges we have made,” Takaichi told reporters as victory became clear, underscoring the challenges ahead for Japan’s new government.
