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The benchmark Topix gained 1.5%, boosted by makers of electronics and automobiles, while the blue-chip Nikkei 225 Stock Average climbed 1.9%.
The ruling Liberal Democratic Party defied worst-case scenarios to secure a majority by itself. While the party lost 15 seats, the losses were less than forecasters expected. The victory allays immediate fears that Kishida, whose early polling numbers were unimpressive, might become another short-term prime minister after predecessor Yoshihide Suga lasted just a year on the job.
“The market will react positively to the fact that the LDP didn’t lose that many seats,” said Masahiro Ichikawa, the chief market strategist at Sumitomo Mitsui (NYSE:SMFG) DS Asset Management. “Had the LDP failed to secure a majority by itself, market expectations for the longevity of the Kishida administration would have been shattered.”
READ: Japan Stimulus Set to Pass Easily After LDP Retains Majority
Among those who lost seats was Secretary General Akira Amari, who stepped down from the senior party role following his defeat. Markets will be watching to see who Kishida chooses to replace Amari, who was not a popular pick for the role following his resignation in 2016 amid a funding scandal.
READ: Stock Trader’s Guide to Japan’s First Poll on New Prime Minister
Calling the election was one of the first acts taken by Kishida after being elected LDP leader in September. He aims to enact an economic stimulus package that estimates have put at about 30 trillion yen ($263 billion).
The prime minister is now set to lay out emergency proposals for his “new capitalism” early this month. Observers are also watching for positive news for reopening and tourism stocks amid the potential resumption of a popular travel subsidy program or a relaxing of Japan’s strict border controls.
“First and foremost we’ll have stability, and for the short-term investor in Japanese stocks that’s great news,” said Richard Kaye, a portfolio manager at Comgest Asset Management Japan Ltd. “There’s going to be no uncertainty, no major changes in policy.”
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