Japan's Nikkei share average rallied ahead of Prime Minister Sanae Takaichi's snap lower house election on February 8, driven by a weaker yen and positive polls for her Liberal Democratic Party. Voters are prioritizing inflation countermeasures, while an AI-doctored campaign video has raised concerns over electoral fairness.
On February 2, Tokyo's stock market saw the Nikkei 225 index rise 0.3% to close at 53,476.35, after climbing as high as 1.7% earlier in the session. The broader Topix index gained 0.5% to 3,582.92, with the Nikkei up 5.9% for the year to date.
Takahisa Odaka, a senior strategist at Nomura Securities, noted that 'political stability is generally positive for shares, and Monday’s market reflects that optimism.' He added, 'Regardless of the election outcome, as many things remain unclear, we’re seeing tailwinds from that aspect. Furthermore, the weaker yen is likely having a positive effect, lifting sectors that seemed to be negatively impacted by the exchange rate.'
An Asahi newspaper survey indicates the ruling Liberal Democratic Party (LDP) is poised for a landslide victory in the February 8 snap lower house election called by Prime Minister Sanae Takaichi. She aims to consolidate her grip on the LDP and secure a mandate for her expansionary fiscal policy, which has been welcomed by stock markets despite pressuring Japanese government bonds and the yen.
In forex markets, the yen fell 0.5% to 155.51 against the dollar after Takaichi's comments at a Saturday election rally, where she described a weak currency as 'a major opportunity for export industries' to cushion the auto sector against U.S. tariffs. She later clarified that her intent was to emphasize building an economy resilient to currency fluctuations, cooling speculation of intervention.
Voters are voicing strong concerns over inflation. At a speech in Seiro, Niigata Prefecture, a woman in her 50s working for a local company said, 'Prices continue rising, so I want more efforts to be made in the implementation of countermeasures.'
The campaign has been marred by an AI-altered video of a Centrist Reform Alliance (CRA) broadcast, showing co-chairmen Yoshihiko Noda and Tetsuo Saito dancing, which garnered over 1.6 million views on X. Posted Friday morning from a Japanese account, it was deleted Saturday noon with an apology for intending humor. A CRA spokesperson expressed disappointment, stating it 'runs counter to the purpose of campaign broadcasts to convey the views of a political party.'
Harumichi Yuasa, a Meiji University professor of information law, warned that 'if fake videos of campaign broadcasts are created, viewers could easily believe that the content is real,' potentially distorting voter judgment. He called for legal reviews to address AI misinformation in elections.
These developments unfold as Takaichi's administration navigates economic security amid fractures in U.S.-Japan-Europe ties, with her October policy speech reaffirming the alliance while addressing Trump's tariffs' impacts on inflation and small businesses.
