After Takaichi won a landslide in the snap election, Japanese stocks rose

Sanae Takaichi, Japan's new prime minister, won a landslide victory in a snap election, raising hopes that her pro-growth policies will boost Japanese stocks

The announcement that Sanae Takaichi, the country's new prime minister, won a landslide victory in the country's snap election on February 8 has caused a positive reaction in Japanese stocks.

Shortly after taking over as leader of the Liberal Democrat Party (LDP), Takaichi called the election in the hopes of gaining a sizable majority to enact her economic agenda, which is expected to include increased government spending in an effort to boost the nation's economy.

It was considered a risk to call the snap election, particularly since Takaichi had hinted that she would resign as prime minister if she did not secure a sizable majority. However, the LDP's purchase of 316 of the 465 seats in Japan's House of Representatives seems to have paid off, marking the first time in the country's current parliamentary system that a single party has obtained a two-thirds majority.

The LDP obtained 352 of 465 seats in conjunction with the Japan Innovation Party, its coalition partner.

Japanese stocks increased as a result of the victory; on Monday, February 9, the Nikkei 225 gained 3 points to 9 percent.

"Sanae Takaichi, Japan's first female prime minister, and the ruling LDP party she leads won a stunning landslide victory," said Tom Stevenson, investment director at Fidelity International.

"Takaichi wanted to win big. However, Sunday's landslide was larger than anyone had anticipated, making Japan a symbol of political stability, Stevenson continued.

What does Takaichi's significant victory signify for Japanese stocks?

The first female prime minister of Japan, Takaichi, has been tasked with presenting a strong pro-growth agenda for the Japanese economy.

According to Hisashi Arakawa, Head of Japan Equities at Aberdeen Investments, "this includes expansionary fiscal spending and increased strategic investments in areas such as semiconductors, artificial intelligence (AI), energy security, defense, and shipbuilding." In order to boost domestic consumption, there is also discussion about halting the 8% consumption tax.

According to Stevenson, "industrial stocks saw significant gains on the expectation that strategic spending plans would strengthen important sectors."

The pro-growth initiative of Takaichi will align with a longer-term trend in the Japanese stock market, specifically the efforts of the Financial Services Agency to further enhance corporate governance in the nation.

As a result, Japanese businesseswhich have traditionally tended to hoard large sums of cashwill be encouraged to give this money back to investors through share buybacks, dividends, and reinvestment.

"We think the market is rewarding businesses that can generate steady profits and quickly adjust to a changing operating environment, so we think the outlook for quality is still positive," Arakawa stated.

What dangers exist in Takaichis's plan?

Although her gamble on a snap election has paid off, Takaichi's move carries some risk for Japan's economy.

Japanese government bond yields have increased due to concerns that Takaichi's economic program will increase the nation's already high levels of government debt in developed markets, particularly in light of her new mandate.

Kate Marshall, lead investment analyst at Hargreaves Lansdown, stated, "Companies are wary of higher government borrowing and potential tax changes." "Labor shortages are another issue. Japan's population is rapidly aging, and Takaichi has adopted a more restrictive immigration policy.

Yields on 10-year Japanese government bonds have risen from about 1 percent to over 2 percent over the past three months, roughly matching Takaichi's term as prime minister. On February 9, they reached a high of 2 percent.

Stevenson stated that "investors are keeping a close eye on developments, not just for the impact on Japanese assets but possibly on other markets as well." Treasuries US government bonds become less appealing due to rising yields on Japanese government bonds, which may lead to a repatriation of assets from the US to Japan. US stocks, particularly growth stocks, may suffer from higher Treasury yields since bond yields decrease the present value of these stocks.

How Japanese stocks can be invested in.

Direct purchases of Japanese stocks may be possible for certain UK-based investors, depending on the broker. But the majority would rather invest through a fund or investment trust that has a national focus.

The Vanguard FTSE Japan UCITS ETF (LON:VJPN) and the iShares Nikkei 225 UCITS ETF (LON:CNKY) are two tracker funds that investors can choose for broad exposure to the Japanese stock market. They follow the Nikkei 225 index, which includes 225 of Japan's biggest and most traded stocks, and the FTSE Japan index, which is made up of large and mid-sized Japanese stocks.

Baillie Gifford Japan Trust (LON:BGFD) and JPMorgan Japanese Investment Trust (LON:JFJ) are the two biggest investment trusts that concentrate on the Japanese market as of February 9.