Nikkei Hits Record High for Second Day as Markets Bet on Takaichi's Fiscal Expansion

The Tokyo Stock Exchange witnessed something remarkable on February 10th: the Nikkei 225 index closed at an all-time high of 57,650.54, marking its second consecutive record-breaking day with a 2.28% surge.

When Politics Meets Market Psychology

The catalyst wasn't economic data or corporate earnings—it was pure political momentum. Following the Liberal Democratic Party's landslide victory in Sunday's general election, investors are betting big on Prime Minister Sanae Takaichi's promise of "responsible yet aggressive" fiscal policies.

Koichi Fujishiro, senior economist at Dai-ichi Life Research Institute, captured the mood perfectly: "It's more about investor sentiment rather than economic fundamentals." The buying frenzy, he noted, is driven by fear of missing out on potential gains.

The market's enthusiasm was broad-based. Nonferrous metals, consumer credit, and real estate sectors led the charge. Furukawa Electric exemplified the optimism, soaring 22.9% after releasing strong earnings. Meanwhile, semiconductor and tech stocks rode the wave of their U.S. counterparts' overnight gains, fueled by continued AI sector expectations.

The Currency Paradox

In a curious twist, the dollar weakened to the lower 155 yen level—not because of Japanese strength, but due to reports that Chinese regulators advised financial institutions to reduce their U.S. Treasury holdings. This dollar weakness actually benefited Japanese stocks, making them more attractive to foreign investors and boosting export competitiveness.

Beyond the Headlines: What This Really Means

Takaichi's "aggressive" fiscal stance represents a significant shift from Japan's traditionally cautious approach. Her policies could include infrastructure spending, tax cuts, and deregulation—moves that would directly benefit the private sector at the expense of government belt-tightening.

But here's the catch: Japan's debt-to-GDP ratio already exceeds 260%, the highest among developed nations. Can the country afford another round of fiscal expansion? And more importantly, will these policies actually translate into sustainable economic growth, or are markets getting ahead of themselves?

For global investors, Japan's renewed fiscal activism could signal a broader trend. As central banks worldwide grapple with slowing growth, the return of government spending as an economic driver might be more than just a Japanese phenomenon.