Japan’s Nikkei stock index rose 4.7 percent to a record high of 47,944.76 on Monday, driven by a remarkable surge of investor optimism over the election of conservative Takaichi Sanae as leader of the Liberal Democratic Party (LDP), and most likely the first female prime minister of Japan.
Kyodo News marveled at the unexpected strength of the Takaichi stock surge, which saw other indexes hitting record highs alongside the Nikkei.
“Almost all sectors on the top-tier Prime Market gained ground, led by machinery, electric appliances and real estate issues,” Kyodo News reported.
The yen fell to two-month low against the U.S. dollar and hit a record low against the euro, as fears of an interest rate hike dissipated and investors anticipated easy monetary policy under Takaichi.
“Today’s steep rise was likely driven by her surprise victory and a celebratory mood that Japan will have the first female prime minister,” said financial strategist Maki Sawada.
Takaichi is a disciple of the late Abe Shinzo, the former prime minister whose “Abenomics” policies are appealing to Japanese voters in retrospect, given the dour economic developments after he left office.
Takaichi is a populist conservative whose policy outlook on economics and immigration has been compared to former British Prime Minister Margaret Thatcher – her self-described “role model” – and current U.S. President Donald Trump. Trump enjoyed a close personal friendship with Takaichi’s mentor Abe.
Considering how low her odds of winning the race to succeed unpopular LDP Prime Minister Ishiba Shigeru looked just a few days before the weekend leadership election, the response to her victory has been surprisingly euphoric. A three-day opinion poll concluded on Monday found 68.4 respondents had “high expectations” for her prospective administration, which is particularly impressive given the public’s generally gloomy impression of the party she now leads.
On that note, the same poll found 77.5 percent of respondents were opposed to Takaichi naming any LDP lawmakers linked to the party’s recent scandals as members of her administration. LDP has been embroiled in a political fundraising scandal for the past two years, and while it remains the largest political party in Japan, it lost its majorities in both houses of the National Diet and bled support to other parties, including upstarts like the populist, anti-immigration Sanseito.
One reason for Takaichi’s big win was the damage the fundraising scandal inflicted on many of the feuding factions within the vast LDP. One of the heaviest hitters to avoid public anger was former prime minister Aso Taro, whose support seems to have put Takaichi over the top against her leading opponent, farm minister Koizumi Shinjiro.
Some of the euphoria surrounding Takaichi comes from the sense that she could put the fractured pieces of the LDP back together again and restore some sense of unified purpose to Japanese politics. Her status as the first woman to become prime minister is helpful in that regard, with 86.5 percent of respondents in the weekend poll saying it was “desirable” for Japan to have its first female PM.
The first bridge Takaichi seems intent on building is not with the opposition, but with LDP’s coalition partner Komeito, a smaller conservative party with Buddhist religious ties that prides itself on clean, corruption-free politics.
One of the biggest philosophical differences between Komeito and LDP is the latter’s shift toward a more hawkish military posture, including efforts under Abe to revise the pacifist postwar constitution. Komeito is also less concerned with immigration than Takaichi and fears her aggressive posture could cause friction with China.
Takaichi met with Komeito chief Saito Tetsuo on Tuesday to address his concerns and also put out feelers to the center-right Democratic Party for the People (DPFP). Takaichi seems intent on implementing her ally Aso’s plan to bring the DPFP into the ruling coalition with LDP and Komeito, a triple threat that could return LDP to dominance in both houses of the National Diet – unless Komeito bolts, which might cause enough problems for LDP to postpone the October 15 parliamentary session that would confirm or deny Takaichi as prime minister.
Takaichi built another bridge on Monday by saying she would appoint one of her rivals from the leadership election, Motegi Toshimitsu, as foreign minister. Motegi held the same post during the first Trump administration and has been a leader in trade talks with the United States this year.
President Trump, who is tentatively scheduled to visit Japan later this month, offered enthusiastic — and somewhat premature — congratulations to Takaichi through his Truth Social account on Monday.
“Japan has just elected its first female Prime Minister, a highly respected person of great wisdom and strength! This is tremendous news for the incredible people of Japan. Congratulations to all!” Trump proclaimed.
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