Nikkei Average Soars on Takaichi Trade: The Start of a New Market Phase

Today, the Nikkei Stock Average closed at 47,944.76 yen, up 2,175.26 yen (4.75%) from the previous day's close, marking a significant new all-time high.
This magnitude of increase is the fourth largest in history.

It appears that the birth of the new Takaichi presidency has been accepted by the market as a positive surprise.

Expectations are rising that fiscal expansion (aggressive economic measures and fiscal spending) advocated by Takaichi will stimulate the economy.

Following these policy expectations, investors' outlook on the Japanese economy and corporate performance has brightened, and a flood of buy orders in the stock market pushed prices up. This movement also has an aspect of a
celebratory market.

This is the exact opposite of what happened when Ishiba became president last year.
I was also beaten up, but those investors who suffered through that 'Ishiba shock' have finally been rewarded (laughs).

There is a possibility that a new market phase has begun today. So, in what direction will the market move from here?

Basically, I believe it will move in the following flow.

1. Expectations for aggressive fiscal policy
Since Takaichi's stance is aggressive fiscal policy, investment in public works and growth sectors (defense, semiconductors, space, etc.) will expand, and stock prices will rise due to expectations of increased corporate earnings from the short-term demand-boosting effect.

2. Maintenance of monetary easing
The continuation of monetary easing is being noted, which will be a factor supporting stock prices.

3. Progress of yen depreciation
With the continuation of monetary easing in mind, the interest rate gap between Japan and the US is being focused on, leading to a trend where the yen is sold and depreciates. (Although the yen has already depreciated to 150 today.) Yen depreciation is a
tail-wind for export-related companies with high overseas sales ratios and companies that see increased profits when converting overseas earnings into yen.

Looking at it this way, it seems like a 'bullish stock market' turn has arrived, but the stock market doesn't always work out that well.

What I am particularly concerned about is the recent high prices.
Aggressive fiscal policy and continued monetary easing boost domestic demand, which could further accelerate the high prices that are currently a problem. (Rice is still expensive, isn't it...)

If this leads to a situation where the Bank of Japan is forced to raise interest rates at an unexpected timing, it will be negative for stock prices.

Also, what I am a little concerned about is strengthening taxation on financial income
. This was also a topic of discussion during last year's presidential election and under the Kishida administration. There are concerns that strengthening taxation could dampen investor sentiment and lead to a decline in stock prices.

Currently (immediately after the presidential election), the strong expectation for policies of 'aggressive fiscal policy and continued monetary easing' is creating a reaction of higher stock prices and a weaker yen.

However, whether this bull market will continue depends on various factors such as the specific content of future economic measures, consideration for fiscal discipline, and the balance with the Bank of Japan's monetary policy. In particular,
how to deal with high prices, which is the biggest current issue, will be an important point that will influence market evaluation.

A hot market has started again from today.
I hope everyone enjoys this market (^-^)

Thank you for reading until the end.