Japanese stocks experienced a surge on Monday as the yen dropped to a three-month low, following the outcome of Japan’s recent election, where Prime Minister Shigeru Ishiba’s coalition lost its parliamentary majority. This political shift has introduced greater uncertainty regarding future policies and the economy. The ruling Liberal Democratic Party (LDP), which has governed Japan for nearly all of its post-war history, along with its junior partner Komeito, secured only 215 seats in the lower house—falling short of the 233 required for a majority. Previously, the LDP held 247 seats, with Komeito adding another 32.
With the coalition’s weakened standing, the political landscape may shift toward fragile power-sharing agreements that could introduce more instability. Despite the uncertain environment, the Nikkei share average ended the day up 1.82% at 38,605.53, following an early dip and subsequent rise of up to 2.2%. The yen continued to slide during the morning session, hitting as low as 153.885 per dollar—the lowest level since the end of July—and was trading at around 153.505 per dollar as of 0600 GMT.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, remarked on the election’s impact, acknowledging that political uncertainty is generally negative for stocks. However, he noted a sense of relief as this significant event has now passed, paired with the beneficial effect of the weaker yen. For Japan’s prominent exporters, a depreciating yen boosts the value of their overseas sales while also making Japanese stocks more attractive to foreign investors.
Among various sectors, transport equipment led gains, with a notable 3.5% increase. Toyota’s stock rose over 4%, while Nissan saw a 3.5% uptick. The chip sector also saw robust gains, reflecting a positive performance by U.S. chip stocks from Friday, with Advantest, a major chip-testing equipment maker, jumping 4.6%.
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