Japan’s Nikkei share average edged higher on Wednesday, recovering slightly from earlier losses as markets reacted to a Reuters report indicating that the newly appointed Prime Minister Sanae Takaichi is preparing a significant inflation-fighting stimulus package.
As of 0511 GMT, the Nikkei was up 0.1% at 49,357.88, having previously dropped by as much as 1.4% during the session, following a record-high close on Tuesday. Meanwhile, the broader Topix index also extended its gains, trading 0.7% higher at 3,271.12, just below its all-time high of 3,274.06 achieved in the previous session.
Takaichi, who was confirmed as Prime Minister by parliament on Tuesday, is formulating an economic stimulus package anticipated to exceed last year’s ¥13.9 trillion ($92.19 billion), according to government sources. The specifics of the package are not yet finalized, but it could be unveiled as early as next month.
Investors began the day with stock sell-offs to secure profits following a 3.6% rise in the Nikkei during the prior sessions, which culminated in an intraday record high of 49,945.95 on Tuesday. The recent gains followed Takaichi securing vital backing from the Japan Innovation Party, known as Ishin, which was crucial for her victory in the parliamentary vote.
Global investors are increasingly returning to Japan’s equity and bond markets, motivated by expectations of reflationary government policies under Takaichi and a need to diversify from higher-priced markets in the U.S. and Europe. Analysts at Morgan Stanley MUFG Securities noted that Takaichi’s appointment symbolizes structural reform, projecting that if the government successfully implements its growth strategies and corporate governance reforms, the price-to-earnings ratios for the Nikkei and Topix indices could potentially double.
Bond investors, anxious about potential fiscal expansion under Takaichi, have found some reassurance in her expressed commitment to “responsible proactive fiscal policy,” which emphasizes debt sustainability. On Wednesday, Japanese government bond yields generally rose, leading to slight reductions in yields. The 10-year government bond yield fell 0.5 basis points to 1.65%, remaining within a stable range for the week. The 30-year yield, which had reached an unprecedented 3.345% earlier this month amid fiscal concerns, declined by 0.5 basis points to 3.12%, while the 20-year yield remained steady at 2.635%. The two- and five-year yields decreased by 1 basis point each, settling at 0.925% and 1.215%, respectively.
Published on October 22, 2025.
