Global Markets: Japan’s Nikkei Hits 58,000 Yen, JGBs Rally After Election Fallout

The Nikkei stock average broke above 58,000 for the first time on Thursday, joining a rare three-way rally with government bonds (JGBs) and the yen as markets digested the fallout from Prime Minister Sanae Takaichi’s historic election victory. The benchmark Nikkei 225 Index rose 0.3% to 57,816.14 after hitting a high of 58,015.08 earlier in the day as trading resumed after a holiday. So far in 2026, the Nikkei is up about 15%. The broader Topix climbed 0.7% to 3,880.48. Earnings season in the world’s fourth-largest economy has begun, with domestic stock markets buoyed by bets that a decisive showing by Takaichi’s Liberal Democratic Party in Sunday’s national elections will allow it to push through spending and tax relief measures. Since Takaichi began her rise to become Japan’s first female prime minister in October, the ‘Takaichi trade’ has pushed domestic stocks to successive record highs, while Japanese government bonds and the yen fell. Takaichi reiterated Monday her commitment to “responsible, proactive fiscal policy.”

“After the recent strong earnings performance and the LDP’s landslide victory under the Takaichi government, the market has seen a significant upward trend,” Wataru Akiyama, strategist at Nomura Securities, said of domestic stocks. “The sense of overheating seems to be getting stronger, so profit-taking moves may emerge from now on.” Takaichi is sensitive to how markets react to her decisions, particularly to interest rate movements on the yen and Japanese government bonds, two sources told Reuters. The yen rallied on Thursday after top currency diplomat Atsushi Mimura issued a new warning against the currency’s volatility and raised speculation about interest rate controls, a typical precursor to actual market intervention.

Long-term securities led a rally in Japanese government bonds on Thursday, as the yen hit a two-week high at 152.28 per dollar.

The yen’s surprising strength has come from Takaichi’s ability to win a solid majority in the lower house and end concerns about political instability that have persisted since July last year, said Hirofumi Suzuki, chief foreign exchange strategist at SMBC.

“This suggests that the yen short positions have been unwound,” Suzuki added. There were 150 advancers on the Nikkei index, compared to 74 decliners. Honda Motor was among the bigger losers, falling 3.3% after the automaker posted a 61% drop in third-quarter profit after market hours on Tuesday.

SoftBank Group’s results after the bell on Thursday will be closely watched for details on how it will finance its massive investments in AI.