Nikkei extends record rally as Japan makes history with first female PM

TOKYO: Japan’s Nikkei share gauge closed at a record high on Tuesday, led by consumer stocks, after fiscal dove Sanae Takaichi clinched a parliamentary vote to become the nation’s first woman prime minister.

Earlier in the day, the share gauge rose as much as 1.55 percent, but gave up most of its gains in choppy trade after Japan’s two houses of parliament confirmed Takaichi as premier.

The Nikkei 225 Index closed 0.3 percent higher at an unprecedented 49,316.06. The broader Topix pared early gains to settle near the flatline. Japanese government bonds rallied and the yen weakened.

As Takaichi campaigned for and won the leadership of the ruling Liberal Democratic Party earlier this month, the so-called “Takaichi trade” emerged that was bullish on equities and bearish for long-term bonds and the yen. But her ascent to the prime minister’s seat was delayed after long-time political partner Komeito split from the coalition.

In the previous session, the Nikkei soared after the LDP secured a new partner in the Japan Innovation Party, known as Ishin, to strengthen Takaichi’s support in the Diet.

The coalition will still be a minority in government, which may limit the scope of their fiscal plans, according to Mizuho Securities senior market economist Yusuke Matsuo.

“We think the administration will be compelled to take a pragmatic approach to economic policy and do not expect the Takaichi trade to gain significant traction in the medium term,” Matsuo wrote in a note.

Takaichi received 237 votes in a lower house vote on Tuesday, topping the majority of the 465-seat chamber. Market attention now turns to who may fill out her cabinet for signs of how the new government will approach spending and debt management.