Tokyo equity benchmarks reach new highs amid early election speculation

Japan’s main stock gauges climbed to all-time highs on Wednesday as growing expectations of an early general election intensified demand for domestic equities and weakened the yen.

The Nikkei 225 advanced 1.48 percent, breaching the 54,000-point threshold for the first time and closing at 54,341.23. The broader Topix rose 1.26 percent to 3,644.16, also a record. Trading desks attributed the surge to mounting speculation that Prime Minister Sanae Takaichi will dissolve the lower house of parliament and call a snap poll, a move that could take place as early as February.

Market participants commonly refer to the combination of a softer currency and rising share prices before a vote as the “Takaichi trade.” The prospect of pro-growth policies, such as additional fiscal stimulus or incentives for corporate investment, has encouraged investors to rotate into large-capitalization exporters, which benefit when the yen loses ground against the U.S. dollar.

The Japanese currency weakened beyond the ¥159 per dollar mark during the session, its lowest level since July 2024, when authorities last intervened in foreign-exchange markets to stem depreciation. A sustained move above ¥159 raises questions about the likelihood of renewed intervention by the Ministry of Finance and the Bank of Japan, whose previous action temporarily stabilized the currency but failed to reverse its longer-term drift.

In a research note circulated on Tuesday, Bank of America remarked that overseas investors tend to increase allocations to Japanese equities ahead of lower-house elections and often favor “large-cap, high-return-on-equity and high-beta names” during such periods. Data from the Tokyo Stock Exchange showed foreign net buying for the fifth consecutive week, reinforcing the theme.

The rally in Tokyo contrasted with a mixed picture elsewhere in the Asia-Pacific region. South Korea’s Kospi gained 0.65 percent to end at 4,723.1, while the technology-heavy Kosdaq slipped 0.72 percent to 942.18. Hong Kong’s Hang Seng index added 0.33 percent late in the session, supported by consumer non-cyclical and technology shares, but mainland China’s CSI 300 reversed early strength to finish 0.4 percent lower at 4,741.93. In Australia, the S&P/ASX 200 edged up 0.14 percent to 8,820.6.

Commodities also drew attention as spot silver topped $90 per ounce for the first time, rising 3.7 percent. The metal has been among the best-performing assets of 2025, supported by industrial demand and its perceived role as an inflation hedge. According to data compiled by the London Metal Exchange, cumulative year-to-date gains have outpaced those of gold and several base metals.

Imagem: Finances

Overnight in the United States, equity benchmarks retreated following a series of policy proposals floated in recent days by President Donald Trump, which injected fresh uncertainty into financial markets. The S&P 500 slipped 0.19 percent, the Dow Jones Industrial Average fell 0.8 percent, and the Nasdaq Composite declined 0.1 percent. Shares of JPMorgan Chase weighed on the S&P 500 despite the bank reporting quarterly earnings that exceeded analyst forecasts.

Analysts noted that the divergence between Japanese and U.S. equity performance underscores differing macroeconomic backdrops. Tokyo’s upward momentum has been fueled by domestic political expectations and the yen’s depreciation, whereas Wall Street continues to grapple with monetary policy signals from the Federal Reserve and headline-driven volatility surrounding the U.S. presidential contest.

Looking ahead, investors will monitor any official statements from the Japanese government regarding the election timetable, as well as potential comments from the Bank of Japan on currency moves. A confirmation of a February poll could extend the current risk-on sentiment, while an unexpected delay might prompt profit-taking after the market’s sharp advance.

Crédito da imagem: Yuichi Yamazaki / AFP