Japanese stocks go nuts on stimulus expectations and Pokémon mania sends Nintendo soaring


Japanese stocks have gone nuts on Monday, fueled by hopes for additional fiscal and monetary stimulus following a crushing victory for the ruling Liberal Democratic party in Upper house elections held over the weekend.

The benchmark Nikkei 225 index finished the session up 3.98% at 15,708.82, recording its largest one-day percentage increase since March 2.

One individual stock that drew attention around the world was Nintendo. Its shares were up more than 20% because of the incredible popularity of Pokémon Go, its new mobile game which is taking the world by storm.

Despite the enormous rally, the index is only back to the levels seen this time last week.

Nikkei 225 Hourly Chart

On top of the positive lead provided by US and European markets on Friday, the gains were fueled by hopes for additional fiscal stimulus following Japanese upper house elections held over the weekend, something that delivered the ruling coalition a landslide victory.

The victory will still bolster [Shinzo] Abe’s grip over the conservative party that he led back to power in 2012 promising to reboot the economy with hyper-easy monetary policy, fiscal spending and reforms, said Reuters.

Prime minister Shinzo Abe had cast the election as a referendum on “Abenomics”, the policy that began in 2012 to boost the Japanese economy through the so-called “three arrows” of fiscal stimulus, monetary easing and structural reforms.

Following the decisive election result, Abe told reporters on Monday that he will instruct economy minister Ishihara to compile an additional economic stimulus package on Tuesday.

While he stopped short of detailing how large the fiscal package would be, Abe stipulated that he plans to speed up railway infrastructure investment, using construction bonds to fund the stimulus package.

Further helping to bolster stock market gains was the visit of former US Federal Reserve chair, Ben Bernanke, to the Bank of Japan on Monday.

While a scheduled visit, the meeting has helped to boost sentiment that the Bank of Japan will loosen monetary policy settings even further following the election result.

According to Reuters, citing sources familiar with the visit, Bernanke is expected to meet with BOJ governor Kuroda, along with Japanese prime minister Shinzo Abe.

The Bank of Japan will announce its next monetary policy decision on July 29.

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