Japan's flagship stock index hit its highest point since 1996 today after the resounding victory of Prime Minister Shinzo Abe in last night's election.
The Nikkei 225 index gained 1.11 per cent in Monday trading to close at 21,696.65 points, after hitting a high of 21,723.60 late last night. The increase represented a record 15th straight daily gain for Japanese stocks.
The Japanese yen lost 0.21 per cent against the US dollar, with Abe's victory seen as a positive sign for further monetary policy stimulus by investors, according to Ian Williams, economist at Peel Hunt. Abe's renewed mandate likely ensures stability at the Bank of Japan, with Haruhiko Kuroda expected to be reappointed.
Kallum Pickering, an economist at Berenberg Bank, said: "Further reforms and an aggressive monetary policy will likely set the stage for the Japanese economy and its financial markets to sustain their recent positive momentum."
The yield on Japanese 10-year bonds fell to 0.69 per cent, according to Tradeweb, as slightly increased demand for government debt greeted the victory.
Abe's victory capped a remarkable turnaround for the Prime Minister, who was struggling under the weight of corruption scandals, low approval ratings, and weak electoral performances in the capital, Tokyo, during the summer.
However, the crisis in North Korean relations has since boosted Abe's Liberal Democratic Party (LDP), with the Prime Minister benefiting from his more hawkish stance on foreign policy, according to Freya Beamish, Asia economist at Pantheon Macroeconomics.
The victory in the snap election called in September will deliver a supermajority in the lower house for the LDP, allowing Abe a strong chance of pushing through changes to Japan's pacifist constitution.
The constitution, which was imposed on Japan by the US after the Second World War, bans the country from having a military capable of offensive action. However, under pressure from North Korea, which has repeatedly tested missiles capable of delivering devastating blows to Japan, Abe may now be able to gain support from the two-thirds of parliamentarians needed to change the constitution. Any changes would then go to a referendum.