Japan’s stock market hit a landmark milestone on Monday as the Nikkei 225 surged past the psychologically significant 50,000 level for the first time in history.
The benchmark index was trading at 50,367.38, up 2.17%, with year-to-date gains reaching an impressive 25.80%.
This historic rally comes at a pivotal moment for Japan, as US President Donald Trump is all set to arrive in Tokyo for crucial bilateral talks with newly appointed Prime Minister Sanae Takaichi, setting the stage for discussions on trade, defense, and massive Japanese investments in America.
The convergence of domestic fiscal optimism and easing international tensions has propelled Japanese equities to unprecedented heights, underscoring renewed confidence in Asia’s second-largest economy.
Nikkei 225: What’s fuelling the market momentum?
The Nikkei blasting past 50,000 isn’t a fluke; it’s the product of both local policy optimism and better-than-expected geopolitical news sending investors into risk-on mode.
A big driver is Prime Minister Takaichi’s new economic playbook. Just a week into her job, she’s rolling out a stimulus package expected to top 13.9 trillion yen, roughly $92 billion.
Her plan attacks three fronts at once: easing inflation pressure on households, pouring money into future-making sectors like AI and chips, and shoring up national security as tensions heat up in the region.
But it’s not just domestic policy fueling the rally. Investors also got a surprise boost from Washington and Beijing.
Over the weekend in Kuala Lumpur, US and Chinese negotiators reached a preliminary deal on several flashpoints, from rare earth exports and tariffs to fentanyl enforcement.
US Treasury Secretary Scott Bessent said Trump’s threat of 100% tariffs on Chinese imports is now “basically off the table,” while China agreed to buy more soybeans and delay tougher rare-earth export restrictions.
The relief was felt across Asia: Japan’s broader TOPIX index also jumped 1.72% to 3,325.82, hitting its own record high.
Trump-Takaichi summit: Balancing investment commitments and defense spending
President Trump’s visit to Japan is shaping up to be a major stress test for Prime Minister Sanae Takaichi as she has to juggle Washington’s demands while keeping her own voters on board back home.
The two leaders will meet on Tuesday at the Akasaka Palace, the same venue where Trump met Shinzo Abe six years ago.
The agenda is dominated by two linked topics: Japan’s planned $550 billion investment in the US, and Tokyo’s promise to ramp up defense spending.
Takaichi isn’t starting from zero with Trump. She was close to Abe, who built a personal rapport with Trump through endless rounds of golf diplomacy, and she seems to have already won favorable standing with him.
That massive $550 billion commitment, brokered by former minister Ryoji Akazawa after eight trips to Washington, didn’t come cheap.
Japan agreed to put in more than 10% of its GDP to support US priorities in return for lighter tariffs than Trump had originally threatened.
The catch? Three months on, neither side has agreed on how that money will actually be used, and Japanese officials are nervous that Trump’s team might steer the funds toward projects that don’t serve Japan’s strategic interests.
In the upcoming talks, Trump is expected to stake out control over where the money goes, while Takaichi will be trying to make sure Japan doesn’t lose leverage in the process.
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