The Nikkei 225 Index continued its strong surge on Monday, reaching a record high, as investors cheered the landslide win by Sanae Takaichi in the latest snap election. It soared to a high of ¥57,315, bringing its year-to-date gains to 12.6%, meaning that it has continued to beat US indices like the S&P 500 and Nasdaq 100.

Sanae Takaichi’s win boosts Japan stocks 

The Nikkei 225 Index continued its strong bull run as investors anticipated more stimulus after Sanae Takaichi and her ruling Liberal Democratic Party won the snap election in a landslide. Her party secured a two-thirds majority, solidifying her mandate following last year’s nomination by her party.

Therefore, analysts believe that Takaichi will now have an easier approach to get her stimulus money flowing in the economy. While this will be good for the stock market, it risks putting the country’s finances in a precarious situation, which explains why Japan’s bond yields soared. It also explains why the Japanese yen has remained weak in the past few weeks.

Takaichi has embraced Shinzo Abe’s policy of growth through stimulus. In her initial days, she implemented a $175 billion stimulus package, and in her campaign, she promised to cut taxes on food and other items.

The risk, however, is that cutting these taxes will lead to a revenue shortfall, a not thing as Japan has a debt-to-GDP ratio of 237%.

Japan stocks also soared, mirroring the performance of the US equity market on Friday. The Dow Jones Index crossed the important resistance level at $50,000, while the Nasdaq 100 and S&P 500 jumped by over 2%

Looking forward, the next key catalyst for the Nikkei 225 Index will be key earnings from some of the biggest companies in Japan. Recruit Holdings, Fujikura, and Mitsubishi Estate will be the ones to watch on Monday.

Honda Motor and IHI will publish their numbers on Tuesday, while Japan Tobacco and Softbank will release their numbers on Thursday, while Tokio Marine, MS&AD, and Japan Post will release their numbers on Friday.

Nikkei 225 Index technical analysis 

Nikkei Index chart |Source: TradingView  The daily timeframe chart shows that the Nikkei 225 Index has been in a strong uptrend since April last year as it moved from a low of ¥30,790 to a record high of ¥56,630.

It moved above the key resistance level at ¥54,522, its highest swing in January this year. This price was the upper side of the ascending triangle pattern.It moved above all moving averages and the Supertrend indicator. Also, the Relative Strength Index (RSI) has continued rising.

Therefore, the most likely scenario is where it continues rising as bulls target the psychological level at ¥60,000 as the uptrend continues. However, a drop below the key support level at ¥54,522 will invalidate the bullish outlook and point to more downside.

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