Japan’s Nikkei reached an unprecedented peak on Tuesday, as markets adjusted to US Market’s two-day upswing following a public holiday closure. The Nikkei advanced by as much as 3.6%, reaching a historic high of 53,814.79. Meanwhile, the broader Topix increased by as much as 2.4%, reaching a new high of 3,599.31. Prominent Japanese equities experienced significant appreciation, as SoftBank advanced by 5%, while Advantest and Tokyo Electron exhibited remarkable increases of 8.99% and 8.31%, respectively.

Meanwhile, overnight in the US, the Dow Jones and S&P 500 both reached all-time highs, with technology shares standing out as notable outperformers. Nikkei 225 futures experienced a significant increase over the three-day holiday following a report from the Yomiuri Shimbun on Friday. The report indicated that Prime Minister Sanae Takaichi might dissolve the Lower House as soon as this month, thereby heightening the prospects of a snap election occurring in early February.

Takaichi, Japan’s inaugural female prime minister and an advocate for expansionary fiscal policies, presently holds robust approval ratings. An early election may enhance her political position and provide her with increased latitude in governance.It is a prevailing view in financial circles that the dissolution of parliament by Takaichi would likely lead to a depreciation of the yen, an increase in equity prices, and a decline in bond values. This perspective is grounded in the notion that “early elections mean proactive fiscal spending,” as articulated by Maki Sawada.

Investor sentiment experienced an uptick following the significant depreciation of the yen since the close in Tokyo on Friday, as a weaker currency increases the value of foreign earnings for Japan’s export-oriented firms. Yields on Japan’s 10-year government bonds rose by more than 5 basis points to 2.15%, whereas 20-year yields surged over 8 basis points to 3.137%. Meanwhile, the Japanese yen experienced a slight decline, reaching a one-year low of 158.25 against the US dollar.