Japanese stocks set a record 15th consecutive day of gains as investors cheered a thumping election victory for Shinzo Abe and the prospect of more economic stimulus.
The Nikkei 225 stock index closed up 1.1 per cent to 21,696 as investors welcomed a stable government and bet on the continuation of the prime minister’s past five years of easy fiscal and monetary policies.
With only three results outstanding, the ruling coalition of Komeito and the Liberal Democratic party had 313 seats, giving them the two-thirds parliamentary “super majority” of 310 seats that Mr Abe needs to pursue his personal priority of constitutional reform.
Speaking in the wake of his third election triumph, Mr Abe signalled he wanted to build a consensus on changing the constitution, while pushing ahead with economic stimulus.
“The key to sustainable growth is to tackle our demographic decline,” the prime minister said. “With a productivity revolution to create a strong impetus for rising wages, I want to defeat deflation.”
Analysts said the market welcomed the stability of another Abe administration given the threat from North Korea. Nuclear related stocks such as Kansai Electric Power have outperformed since the start of the election as it became clear that Yuriko Koike, who ran on an anti-nuclear platform, was headed for defeat.
“The gamble has paid off for Shinzo Abe with a big extension to his mandate,” said Luke Bartholomew, strategist at Aberdeen Standard Investments. “Markets like strong leaders with big mandates.”
The yen traded down 0.3 per cent at ¥113.78 per dollar. The broader Topix index was up 0.8 per cent at 1,745 — an 11th consecutive day of gains.
After his victory, Mr Abe had a half-hour telephone conversation with US President Donald Trump, who will visit Asia in early November. Mr Abe intends to introduce Mr Trump to the families of Japanese kidnapped by North Korea, and the two men will play golf with Hideki Matsuyama, the professional golfer.
Nicholas Smith, Japan strategist at CLSA in Tokyo, said how Mr Abe chooses to handle constitutional reform will be crucial to markets in the medium term. With Ms Koike also supporting a change to the constitution, Mr Abe is in a strong position to push for change.
“If he were to make wholesale changes to [war-renouncing] Article Nine then that would crash the market,” said Mr Smith. Before the election, Mr Abe’s proposal was to add an extra clause to confirm the legality of Japan’s armed forces, but leave the pledge to “for ever renounce war” in place.
The prime minister struck an emollient tone, signalling he does not want to force through a purely LDP version of constitutional reform. “I don’t think this is something where you win or lose a popular mandate in a general election,” he said, promising to present an LDP plan to parliament’s committee on constitutional reform.
The election gave Mr Abe a strong victory in seats but not an overwhelming share of the vote. Full results were still being tabulated but in the Tokyo proportional representation block, Mr Abe’s Liberal Democratic party won 30.5 per cent of the vote compared with 23.6 per cent for the Constitutional Democrats.
Turnout was 53.7 per cent, the second-lowest on record and only marginally higher than at the 2014 election.