Nikkei hits record as weak yen and election speculation fuel rally

The Japanese stock market surged to record highs as it caught up with Wall Street rallies. The Nikkei 225 jumped 3.6% to reach 53,814, while the broader Topix rose 2.4% to new heights. This movement followed a public holiday in Japan, with local investors reacting to all-time highs in the S&P 500 and Dow Jones Industrial Average, driven by technology stocks. Speculation of an early election announcement by Prime Minister Sanae Takaichi to bolster her coalition's position has also lifted market sentiment, with expectations of proactive fiscal spending. The weakness of the yen has enhanced Japan's export earnings outlook. Verbal interventions from Finance Minister Satsuki Katayama had little lasting effect on FX markets, leaving USD/JPY elevated and supporting equity rallies. Japanese stocks were largely unfazed by political pressures on the U.S. Fed, showcasing a current risk-on sentiment in the global market as the session underscored how a weak yen continues to dominate market dynamics.