Are Japanese Investors Optimistic About the New Prime Minister? Nikkei 225 Index Surpasses 44,000 Points for the First Time

Despite the recent political earthquake over the weekend, the Japanese stock market's rally has grown even stronger. On Tuesday, as optimism about the elimination of trade risks and potential increases in stimulus spending spread throughout the market, the Nikkei 225 Index broke through the 44,000-point mark for the first time, setting a new historical high.

The Nikkei 225 Index rose by over 1.2% in early trading on Tuesday, reaching 44,174.78 points, a record high. However, as of the time of writing, the gains have slowed, with the Nikkei 225's increase narrowing to 0.2%, pulling back to 43,732 points. The Topix Index also largely erased all its intraday gains.

One reason is the improvement in trade prospects. Japan's chief tariff negotiator, Akira Akazawa, posted on X on Tuesday that the U.S. would reduce tariffs on Japanese cars by September 16, eliminating the ambiguity in the trade agreement reached in July.

He cited documents from the U.S. Federal Register, stating that the documents formally confirm President Trump's executive order on the U.S.-Japan trade agreement. The revised tariff rates for Japanese goods will take effect within seven days of the executive order's issuance.

Following the resignation of fiscal hawk Prime Minister Yoshihiko Isobe, former Economic Security Minister Sanae Takaichi, a protégé of former Prime Minister Shinzo Abe, has become the hottest candidate to succeed him. Takaichi supports increased government fiscal stimulus and monetary easing policies. If elected, her policies would provide a significant boost to the Japanese stock market.

According to Japanese media reports on Monday evening citing sources, Takaichi has decided to run in the Liberal Democratic Party (LDP) leadership election. In the LDP leadership election last September, Takaichi received 109 votes from party members and affiliates in the preliminary vote, ranking first among nine candidates. However, she lost in the runoff election against Yoshihiko Isobe.