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Japanese stocks experienced a significant rise on Monday as the yen plummeted to a three-month low. This decline followed Prime Minister Shigeru Ishiba's coalition losing its parliamentary majority in Sunday’s election, increasing uncertainty around future policies and economic stability.
Ishiba's Liberal Democratic Party (LDP), which has governed Japan for most of its post-war history, along with junior coalition partner Komeito, secured only 215 seats in the lower house of parliament—falling short of the 233 needed for a majority. The LDP previously held 247 seats while Komeito had 32. This election outcome raises the potential for politically fragmented power-sharing arrangements, possibly leading to instability.
The Nikkei share average climbed 1.45%, reaching 38,463.50, after opening lower. Meanwhile, the yen fell to 153.885 per dollar, its weakest level since July 31. As of 0230 GMT, it was trading approximately 0.8% lower at 153.60 per dollar.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, remarked, "The election results have undoubtedly created negative sentiment in the stock market due to increased political uncertainty." However, he noted a sense of relief among investors as this major risk event has concluded.
A weaker yen tends to benefit Japan's key exporters by enhancing the value of overseas sales, making Japanese stocks more attractive to foreign investors. The transport equipment sector led gains, with Toyota surging nearly 4% and Nissan rising 3.3%.
Despite the current rally, economists like Norihiro Yamaguchi at Oxford Economics caution that the market may struggle until political uncertainty diminishes. Analysts predict the dollar could rise further, with the Bank of Japan's upcoming policy decision on Thursday expected to maintain current rates.
