Introduction: Japan’s Nikkei hits record high and yen strengthens after Takaichi’s election win
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Political drama will be on investors’ minds today, as they react to a landmark election in Tokyo and mounting pressure on UK prime minister Keir Starmer.
The yen has strengthened after Japanese prime minister Sanae Takaichi won a sweeping victory in Sunday’s election, ending a six-day run of losses.
The Japanese stock market has rocketed to a new high too, as investors welcome the prospect of more stimulus.
Takaichi’s Liberal Democratic party (LDP) has won an absolute majority in Japan’s lower house, and with her coalition partner, the Japan Innovation party, Takaichi now has a supermajority of two-thirds of seats.
This will smooth the way for Takaichi to push through a 21tn yen (£99bn) stimulus package, and her pledge to suspend Japan’s 8% sales tax on food for two years.
Those plans had rattled financial markets and caused currency volatility during the election campaign, but there’s now relief that Japan’s political uncertainty appears to be over.
ING say the LDP’s landslide victory in Japan is positive for risk assets, even though her policies could raise Japan’s borrowing levels even higher:
Prime minister Takaichi’s decision to leverage her popularity for her party turned out to be successful.
The landslide victory will reinforce her responsible but expansionary fiscal spending and a more Japan-focused foreign policy. Risk-on sentiment will dominate the market for now.
Japan’s Nikkei share average surged to a record high on Monday, after the election results, surpassing the 56,000 level for the first time at the start of trading. It quickly pushed through the 57,000 point mark, before closing up 3.9% at 56,363 points.
Stock markets like extra fiscal stimulus. After Sanae Takaichi secured Japan’s largest postwar election victory, Nikkei 225 surged over 5% at Monday’s open. Equities had already outperformed in the four months since she took command of the LDP, even accounting for the weak yen pic.twitter.com/uH2AMA7WrS
— Rymond_Inc (@rymondIncKenya) February 9, 2026
The agenda
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Noon BST: European Central Bank chief economist Philip Lane gives lecture at Maynooth University
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4pm BST: ECB presidnt Christine Lagarde participates in plenary debate on the state of the EU economy and ECB activities in Strasbourg, France
Key events
Japan’s election result is likely to encourage more selling of the yen, predicts Lee Hardman, currency expert at MUFG bank.
Hardman told clients this morning:
Yen weakness following the election result has been constrained by the heightened risk of intervention as USD/JPY moves back into the high 150.00s. Japan’s top currency official Atsushi Mimura warned that they are watching market moves with a high sense of urgency.
It followed comments from Finance Minister Satsuki Katayama who said after the election victory that she will communicate with financial markets on Monday if needed. She reiterated that “Japan and the Us have signed a memorandum of understanding, which stated that we can take decisive measures against rapid movements out of line with fundamentals. That certainly includes intervention”.
The ongoing threat of intervention has helped to dampen further yen selling after the lower house election although it remains vulnerable to further weakness if market participants remain concerned over policy direction going forward under Prime Minister Takaichi.
NatWest shares fall after buying Evelyn Partners
Shares in banking group NatWest have dropped over 5% after it agreed to buy Evelyn Partners, one of the UK’s biggest wealth managers.
NatWest will pay £2.7bn deal for Evelyn Partners, a move which will booost its wealth management arm
Evelyn Partners, formerly known as Tilney Smith & Williamson, controls about £69bn of client assets and offers financial planning and wealth management across the UK and Ireland.
The company traces its roots back to 1836 when Thomas Tilney created his eponymous stock brokerage in the City of London. Tilney was bought by Permira in 2014, before acquiring the 145-year-old Glasgow-based investment company Smith & Williamson in 2019, and rebranding to its current name three years later, my colleague Alex Daniel reports.
Pound hits two-week low after McSweeney resignation piles presure on Starmer
Sterling is dropping this morning after the resignation of Morgan McSweeney, Keir Starmer’s chief of staff, increased the pressure on the prime minister.
The pound has fallen by half a eurocent to €1.146, the lowest since 22 January.
It’s also marginally lower (-0.12%) against the US dollar, unwinding a smidgen of Friday’s rally.
UK bond yields are slightly higher, mirroring a move in US Treasuries.
The yield, or interest rate, on 10-year UK bonds is up two basis points at 4.539% (a small move, but one that pushes up the cost of Britain’s borrowing, slightly).
Mohit Kumar, economist at Jefferies, says:
In the UK, political pressure on PM Starmer is mounting which is weighing on UK assets
Sanae Takaichi has achieved Japan’s best-ever post-war election result, point out analysts at Unicredit:
The Japanese parliamentary election, held yesterday, saw an overwhelming victory for the Liberal Democratic Party. The party, led by Prime Minister Sanae Takaichi, won two thirds of the seats in the lower house, the best result for a single party since the end of the Second World War.
Japanese stocks performed well as Takaichi intends to pursue supportive fiscal policy. Japanese government bond yields edged slightly higher, while the yen gained ground after Japanese Finance Minister Satsuki Katayama reiterated her willingness to preserve the stability of the currency.
London’s stock market has opened higher too!
The FTSE 100 share index is up 41 points, or 0.4%, in early trading to 10,410 points, approaching the record high (10,481) set last week.
Precious metals producers Fresnillo (+3.4%) and Endeavour Mining (+3.1%) are the top risers, as gold prices rise this morning.
Other mining stocks are also rising, perhaps reflecting hopes that Japanese growth measures will boost demand.
The LDP party’s election landslide does not give Sanae Takaichi free reign to just spend, argues Sree Kochugovindan, senior research economist, at Aberdeen, explaining:
The LDP are fiscally conservative and Takaichi has been very mindful of bond investors.
The debt/GDP ratio has steadily declined since the pandemic and Takaichi’s latest fiscal and economic package will keep debt/GDP on that downward trend.
Capital Economics: Calm may be on the way for Japan’s markets
Thomas Mathews, head of markets, Asia Pacific, at Capital Economics, has predicted that “calm may be on the way for Japan’s markets now the election is out of the way”.
Mathews doesn’t expect a further sell-off in Japanese government bonds (JGBs) and also forecasts a stronger yen, saying:
Japan’s debt position is actually on a better trajectory than many other countries’. And with the election now out of the way, it’s not obvious to us that Takaichi actually will deliver significant extra fiscal stimulus.
Japan’s bond yields rise, as debt market prepares to digest Takaichi’s fiscal stimulus
The big, BIG, question is whether Japan’s bond market will support Sanae Takaichi’s economic stimulus plans.
So far today, the yield (or interest rate) on 10-year Japanese bonds has risen by 6 basis points (0.06 percentage points) to 2.282% as bond traders react to the news Takaichi’s LDP party and its coalition partner have won a supermajority in Tokyo’s upper house.
The yield on 30-year Japanese bonds has risen too, by 4bps, to 3.55%.
That indicates some jitters in the bond market about the prospect of more debt-fuelled spending as Takaichi tries to spur Japan’s economy and tackle its cost of living crisis.
Kathleen Brooks, research director at XTB, say Takaichi is now “untouchable”, adding:
Takaichi’s election bet has paid off, and she now has a clear mandate to pursue her agenda, which could have market ramifications. All eyes are on the bond market.
Takaichi, like Andy Burnham, is not in hock to the bond market. She has threatened to cut taxes and boost spending even though Japan’s debt to GDP ratio is 250%.
Japan’s FX chief: We’re urgently monitoring the market after after Takaichi’s win
Japan’s top currency official has said the government remains on high alert as it monitors the foreign exchange market.
Atsushi Mimura, the finance ministry’s vice minister for international affairs, spoke out after the yen initially came under renewed pressure following prime minister Sanae Takaichi’s victory in Sunday’s snap election.
Mimura told reporters:
“As always, we are watching market developments with a high sense of urgency.
We remain in close communication with the market.”
Those comments will have helped the yen to strengthen, as markets will anticipate that Tokyo policymakers will act, if necessary, if the yen weakens too much (towards that ¥160/$ line in the sand).
Asia-Pacific markets are rallying across the board today, as traders anticipate a boost from a new fiscal spending programme.
South Korea’s KOSPI has surged by 4.4%, outpaced the Japanese Nikkei’s 3.9% rise. Hong Kong’s Hang Seng has gained 1.75%, and Australia’s S&P/ASX 200 is 1.85% higher.
Ipek Ozkardeskaya, senior analyst at Swissquote, explains why:
The good news is that Japanese Prime Minister Sanae Takaichi won — and won big — her bet in the weekend snap election. She pulled off a stunning victory, with her ruling Liberal Democratic Party (LDP) scoring a historic landslide and securing a two-thirds supermajority in the powerful lower house of parliament — even more if you include its coalition partner.
That gives her party its most dominant position in decades and a strong mandate to push through an expansive fiscal agenda, particularly benefiting defense and technology. This likely helps explain why South Korea’s Kospi rebounded nearly 4% today. Still, the tech rebound could face speed bumps ahead.
The yen is up 0.5% against the US dollar, at ¥156.40/$.
That may seen counter-intuitive, as Sanae Takaichi now has a green light to push through with her debt-funded expansionary policies.
Reuters suspects investors are taking profits after having bet against the yen in the run-up to the election. There’s also the possibility that Tokyo might intervene if the yen weakens closer to the ¥160/$ level.
Introduction: Japan’s Nikkei hits record high and yen strengthens after Takaichi’s election win
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Political drama will be on investors’ minds today, as they react to a landmark election in Tokyo and mounting pressure on UK prime minister Keir Starmer.
The yen has strengthened after Japanese prime minister Sanae Takaichi won a sweeping victory in Sunday’s election, ending a six-day run of losses.
The Japanese stock market has rocketed to a new high too, as investors welcome the prospect of more stimulus.
Takaichi’s Liberal Democratic party (LDP) has won an absolute majority in Japan’s lower house, and with her coalition partner, the Japan Innovation party, Takaichi now has a supermajority of two-thirds of seats.
This will smooth the way for Takaichi to push through a 21tn yen (£99bn) stimulus package, and her pledge to suspend Japan’s 8% sales tax on food for two years.
Those plans had rattled financial markets and caused currency volatility during the election campaign, but there’s now relief that Japan’s political uncertainty appears to be over.
ING say the LDP’s landslide victory in Japan is positive for risk assets, even though her policies could raise Japan’s borrowing levels even higher:
Prime minister Takaichi’s decision to leverage her popularity for her party turned out to be successful.
The landslide victory will reinforce her responsible but expansionary fiscal spending and a more Japan-focused foreign policy. Risk-on sentiment will dominate the market for now.
Japan’s Nikkei share average surged to a record high on Monday, after the election results, surpassing the 56,000 level for the first time at the start of trading. It quickly pushed through the 57,000 point mark, before closing up 3.9% at 56,363 points.
Stock markets like extra fiscal stimulus. After Sanae Takaichi secured Japan’s largest postwar election victory, Nikkei 225 surged over 5% at Monday’s open. Equities had already outperformed in the four months since she took command of the LDP, even accounting for the weak yen pic.twitter.com/uH2AMA7WrS
— Rymond_Inc (@rymondIncKenya) February 9, 2026
The agenda
-
Noon BST: European Central Bank chief economist Philip Lane gives lecture at Maynooth University
-
4pm BST: ECB presidnt Christine Lagarde participates in plenary debate on the state of the EU economy and ECB activities in Strasbourg, France
