Japanese Stock Market Hits Record Highs Amid Political Optimism, Faces Fragility Concerns
Japanese stocks have recently reached unprecedented levels, driven by renewed confidence in domestic politics and the economic agenda of the ruling administration. The Nikkei 225 index has achieved several milestones, surpassing 56,000, 57,000, and approaching 58,000, largely due to the 'Takaichi trade' following Prime Minister Sanae Takaichi's decisive victory in the Lower House elections. This political optimism has been a significant factor in the stock market rally, with investors anticipating increased government spending, tax relief, and a more assertive economic strategy. However, experts caution that the rally may be fragile, as there is a disconnect between the stock market's performance and the underlying economic fundamentals. Concerns have been raised about how the proposed policies will be funded, given Japan's high debt-to-GDP ratio and recent economic contraction.