The Topix ended the day up 0.5% at an all-time high of 3,266.43, having previously recorded an all-time intraday high of 3,274.94.
The Nikkei ended down very slightly for the day at 49,307.79, failing to extend Tuesday’s record high in the final moments of trading. The index recovered from losses of as much as 1.4% earlier in the session to rise as much as 0.3% after the Reuters report.
Sanae Takaichi, who was appointed prime minister by parliament on Tuesday, is preparing an economic stimulus package expected to exceed last year’s 13.9 trillion yen ($92.19 billion), government sources told Reuters on Wednesday.
The exact size of the package has yet to be determined, the sources said. It could be announced as soon as next month.
Investors started the day selling stocks to lock in gains after a 3.6% rally in the Nikkei over the previous two sessions, culminating in a record intraday high of 49,945.95 on Tuesday. The win came as Takaichi received the crucial support she needed from the Japan Innovation Party, also known as Ishin, to secure victory in Tuesday’s parliamentary vote. Global money managers are returning to Japan’s stock and debt markets, drawn by hopes for relational government policies under Takaichi, and by a desire to diversify from the pricier US and European markets.
Takaichi’s appointment as prime minister “symbolizes structural reforms,” Morgan Stanley MUFG Securities analysts wrote in a client note.
“If the government implements its growth strategy and promotes corporate governance reforms, the forward price-to-earnings ratio for the Nikkei and TOPIX would increase by approximately 2x.”
Meanwhile, bond investors worried about potential fiscal profligacy under the Takaichi government have been calmed somewhat by its stated “responsible proactive fiscal policy,” which continues to emphasize debt sustainability.
Japanese government bonds rose slightly on Wednesday, causing yields to fall slightly.
Yields on 10-year Japanese government bonds fell by half a basis point to 1.65%, remaining within this week’s tight range.
The 30-year yield, which had risen to an unprecedented 3.345% earlier this month as budget worries were at their height, fell 1 basis point to 3.115%. The 20-year yield fell by 0.5 bp to 2.63%.
The two- and five-year yields each fell 1 bp to 0.925% and 1.215% respectively.
($1 = 150.7800 yen)
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