AI and Semiconductor Stocks Lead the Rally
Expectations for "Takaichi-nomics" Also Drive Up Share Prices
On October 27, Japan's leading stock index, the Nikkei 225 Average (Nikkei Index), surpassed the 50,000 yen mark for the first time in history. In addition to optimism over a possible U.S. interest rate cut and the global stock market rally driven by the expansion of the artificial intelligence (AI) sector, expectations for the fiscal policy of the Sanae Takaichi Cabinet are believed to have fueled the rise in stock prices.
On this day, the Nikkei Index closed at 50,512, up 2.46% from the previous trading day. Shares related to AI and semiconductors, such as Advantest, SoftBank Group, and Fujikura, led the upward trend. The Nikkei Index had already approached the 50,000 yen level on the 21st. Market analysts say that expectations for fiscal policy under the new cabinet served as a direct catalyst for the rally.
Defense-related stocks also showed strong performance. Ahead of the U.S.-Japan summit scheduled for October 28, expectations that discussions on strengthening defense capabilities would intensify led to a surge in buying. As a result, Kawasaki Heavy Industries reached its highest price in 36 years since its listing in 1989.
The prevailing view is that the Bank of Japan (BOJ) is likely to hold off on additional rate hikes at its monetary policy meeting scheduled for October 29-30 this week, which also supported the rise in stock prices. The market expects the timing of the next rate hike to be as early as December, or by January next year at the latest.
Global conditions also acted as a positive factor. In the United States, growing expectations for rate cuts and signs of easing U.S.-China trade tensions have improved investor sentiment. On October 26 (local time), U.S. Treasury Secretary Scott Besant stated, "China's export controls on rare earths are expected to be suspended, and as a result, there will be no additional 100% tariffs imposed by the United States on China."
The Nikkei predicted that the upcoming earnings announcements by major companies such as Advantest, Tokyo Electron, and Hitachi this week would affect the stock market going forward.
Many in the market expect the Nikkei Index to have further room to rise to around 52,000 yen by the end of the year.
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