Tokyo stocks surge 4pc

The Japanese stockmarket has seen sentiment soar on the back of Shinzo Abe’s electoral victory.

Japanese stocks posted the biggest gain in four months on Monday, driven by the victory of Prime Minister Shinzo Abe’s ruling coalition on Sunday and growing speculation of more fiscal stimulus.

The Nikkei Stock Average rose 601.84 points, or 4.0 per cent, to 15708.82, the biggest daily percentage gain since March 2.

The ruling coalition won handily in the upper house elections and solidified its standing, a rare affair amid tumultuous politics around the world.

“Whether or not political stability can be achieved is a theme globally today. Japan is stable in the mid- to long-term. That is providing support,” said Katsunori Kitakura, strategist at Sumitomo Mitsui Trust Bank.

Mr Kitakura also said the government will likely expand the size of its fiscal stimulus amid Brexit concerns. “They can act boldly,” he said.

Friday’s US jobs data were also strong enough to ease previous fears about the U.S. economic outlook.

Construction and real-estate stocks led the gains. Construction firm Taisei Corp. rose 6.4 per cent to 863 yen. Real-estate developer Mitsui Fudosan Co. gained 6.0 per cent to Y2,161.0.

Still, Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management, said the yen’s recent strength and uncertainty over the European banking sector would likely limit the gains going forward. He said whether the yen’s strength will ease or not is the single most important factor for Japanese stocks.

The dollar was at Y101.48 as of Tokyo stock market close, up from Y100.56 on Friday.

Soichiro Monji, general manager of economic research at Daiwa SB Investments, said Thursday’s Bank of England policy meeting is one factor contributing to the yen’s relative strength. Selling sterling against the yen has been one of the most successful currency bets so far this year.

Not everyone sees Sunday’s ruling coalition victory as positive for the Japanese economy. Scott Seaman, Japan analyst for Eurasia Group, said in a note that the big win will likely embolden Mr Abe and other conservatives to accelerate plans to revise the constitution to formalise the legal legitimacy of Japan’s military.

“Though Abe will continue to stress his commitment to focusing on economic policy, his efforts to advance controversial plans for constitutional revision will hinder the structural reform process,” Mr. Seaman said.

Among individual stock movers, Nintendo Co. jumped 25 per cent to Y20,260, boosted by hopes that its new smartphone game Pokemon Go will help it penetrate mobile game users, an area in which the company has long struggled.

Kyushu Electric Power Co. lost 7.5 per cent to Y919 after the election victory of a new governor in Kagoshima who campaigned on temporarily halting the running of nuclear reactors for security checks. Kyushu Electric’s Sendai nuclear power plant is located in Kagoshima.

— Dow Jones newswires