Japan Sees Record-Breaking Election Victory
Japan’s political developments are evolving quickly and are having a direct impact on financial markets. The NIKKEI 225 rose to all-time highs and has already risen more than 16% in 2026 alone. In addition to this, the Japanese Yen also rises 0.80% after the market open.
Japan’s snap elections have come to a halt with the Liberal Democratic Party coming out as the winner. The Prime Minister's party won more than two-thirds of the lower house, giving her a stronger mandate to push through her policies.
Sanae Takaichi’s Historic Victory
On Sunday, the LDP won 316 of 465 lower-house seats on its own, giving it more than a two-thirds supermajority. The LDP, with its coalition partner, will now control over 350 seats (75% of the house). That result is the largest single-party majority since the LDP’s founding in 1955 and the most seats ever won by any party in postwar Japanese elections.
Analysts were expecting Mrs Takaichi’s party to easily win the elections due to high approval ratings. The Prime Minister's high approval ratings were the main reason behind the snap elections. The victory indicates the public’s support for more growth-oriented economic policies.
Why is the NIKKEI 225 The Best Performing Index?
The NIKKEI 225 is 2026’s best-performing index, rising 16% this year so far. The NIKKEI 255 in the past 12-months has risen 46%, 33% higher than the second-best-performing index. The figures can easily indicate the strength of the index and its trend.
Investors are increasing their exposure to the NIKKEI 225 as inflation returns to Japan for the first time in decades. The lack of inflation was one of the key reasons for investors limiting their exposure to the Japanese markets.
However, the latest and strongest price driver is the elections and the Prime Minister's victory. Japan’s Prime Minister is a clear supporter of an expansionary policy and strong ties with the US. She campaigned on and is expected to pursue policies that emphasise government spending to stimulate economic growth, including fiscal measures aimed at boosting domestic demand and strengthening long-term growth prospects.
NIKKEI 225 - Technical Analysis
The price of the NIKKEI 225 opened on a bullish price gap measuring 1.98% and then rose a further 1.75%. However, the price soon after came under pressure and fell back to Friday’s closing price. Considering the strong overbought indications from the RSI and MACD, the selloff was not a surprise.
Nonetheless, the buy signal remains relatively strong despite the retracement forming. This is also partially due to the strong bullish price movement from Friday. The NIKKEI 225 rose more than 5% on Friday alone.
On the 1-hour chart, price action continues to show bullish indications, with the price holding above previous highs. The recent decline appears consistent with earlier temporary pullbacks rather than a trend reversal. The price also remains firmly above key Moving Averages and on the positive side of the RSI and MACD.
However, the price movements on smaller timeframes seem less positive as the price retraces. If the price returns above 56,499.3 and thereby crosses the 200-bar SMA, the buy signals potentially may return.
The Japanese Yen
The best performing currency of the day is the Japanese Yen due to the results of the elections. The worst-performing currencies are the US Dollar and the British Pound. The Japanese Yen is increasing in value as sentiment towards the currency partially improves. Though another key reason for this is investors' expectations of more inflation due to any upcoming expansionary policy amendments.
Investors are hoping that the policy and higher inflation will prompt the Bank of Japan to continue increasing interest rates throughout the year. However, regardless of the JPY’s bullish reaction to the elections, technical analysis indicates a bumpy ride as the price struggles to maintain momentum.
Key Takeaways:
- Historic LDP win gives PM Takaichi a strong mandate for growth-focused policies.
- NIKKEI 225 hits all-time highs, up 16% in 2026 on political and inflation tailwinds.
- Technical signals remain bullish, with recent pullbacks seen as temporary retracements.
- Japanese yen strengthens on improved sentiment and expectations of higher inflation.
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Michalis Efthymiou
Michalis Efthymiou has extensive experience within the financial sector throughout the UK and Europe. After spending 5 years in London where Michalis operated as a financial advisor and an underwriter, he then entered the market analysis sector.
Additionally, he held training sessions and seminars in over seven countries across the globe and is now focused on providing investors with the required guidance to operate within the market with full confidence.
His teaching methods are based on technical analysis, fundamental analysis and order flow analysis, as well as how to view the market from an institutional angle.
