Global investors have gone crazy for Japan following the Liberal Democratic Party’s landslide election win, led by Japan’s hugely popular first female Prime Minister, Takaichi Sanae.
Non-Japanese investors net-bought ¥2.7trn yen (US$18bn) of Japanese equities in the first two weeks of February alone. This compares to ¥3.8trn of net buying in the whole of 2025 – a good year for Japanese equities performance.
The proximate cause of the surge in foreign buying is the likelihood of the government following business-friendly policies, with easy money, fiscal stimulus, and continued low rates. Winning a supermajority in the biggest victory of the post-war era allows the government a freedom to implement policy that Japan has not experienced in living memory.
The LDP has been in government for all except one term of the post-war period. Political swings in Japan are generally determined by the LDP’s intra-party factional politics, rather than interparty political rivalries. Takaichi must still manage these factions, but with the mandate she has won from the voters, she is in a strong position to do so.
With capital flowing into Japan in the public, as well as private markets – major PE firms have been focused on Japan as the best opportunity they see globally for some time – we may begin to see a reflexive effect on the economy where capital inflows translate into increased confidence and economic activity, which creates a virtuous circle, leading to more inflows and market performance.
