To The Moon

After Sanae Takaichi, leader of Japan’s Liberal Democratic Party, secured a landslide election victory, the Nikkei 225 index jumped about 3.9% in a single session to a record high, while the TOPIX rose 2.3% on the same day.

Japan-related ETFs also posted strong gains. $iShares MSCI Japan ETF(EWJ)$ , $Xtrackers MSCI Japan Hedged Equity ETF(DBJP)$ and $iShares Currency Hedged MSCI Japan ETF(HEWJ)$ each rose about 3.8% on the day, followed by $JPMorgan BetaBuilders Japan ETF(BBJP)$ and $iShares MSCI Japan Value ETF(EWJV)$ at around 3.7%, while $WisdomTree Japan Hedged Equity Fund(DXJ)$ and $Franklin FTSE Japan ETF(FLJP)$ gained roughly 3.6%.

In the election, the Liberal Democratic Party secured 352 seats, close to a two-thirds majority, lifting governing stability to its highest level in years. This significantly reduced the risk of policy reversals or snap elections, providing a multi-year window for fiscal spending, industrial subsidies and structural reforms.

The election outcome strengthened expectations of fiscal expansion. Markets reassessed the government’s ability to maintain investment in areas such as semiconductors, AI, defense and manufacturing upgrades. These sectors carry heavy weightings in both the Nikkei 225 and TOPIX, amplifying index sensitivity to policy changes.

Defense manufacturers including Mitsubishi Heavy Industries, IHI and Kawasaki Heavy Industries performed strongly on February 8, with Kawasaki Heavy Industries surging 16% after reporting earnings that exceeded expectations.

Currency dynamics also supported the rally. Prior to the election, USD/JPY had approached the 158–160 range, raising concerns about potential currency intervention. After the vote, the yen rebounded to around 156, reducing exchange-rate volatility and lowering hedging costs for overseas investors allocating to Japanese equities, thereby boosting short-term risk appetite.

Over the past year, the Nikkei 225 has climbed from roughly 33,000 points to above 56,000, delivering a cumulative gain of nearly 70%, the strongest performance among major Japanese equity benchmarks. With heavier exposure to export-oriented manufacturers, semiconductors and large technology companies, the index has shown greater upside leverage amid improving policy expectations, yen movements and a recovery in global technology demand.

Related ETF Overview

$iShares MSCI Japan ETF(EWJ)$ has assets of about $17.7 billion, is up roughly 10.7% year to date, and charges a management fee of 0.49%, making it the largest and most liquid broad-based Japan ETF.

$JPMorgan BetaBuilders Japan ETF(BBJP)$ manages around $15.5 billion in assets with a low expense ratio of 0.19%, catering more to long-term allocators and showing lower sensitivity to short-term flows.

$WisdomTree Japan Hedged Equity Fund(DXJ)$ focuses on yen-hedged exposure, is up about 13.5% year to date, and charges a 0.48% management fee, attracting strong overseas interest amid currency volatility.

$Franklin FTSE Japan ETF(FLJP)$ charges just 0.09% in management fees, standing out as a low-cost option better suited for long-term holding rather than short-term trading.

$iShares MSCI Japan Value ETF(EWJV)$ is up about 14.1% year to date with a 0.15% expense ratio, appealing to investors targeting Japan’s value-style recovery rather than high-beta exposure.

$iShares Currency Hedged MSCI Japan ETF(HEWJ)$ has assets of around $5.6 billion, employs currency hedging, charges a 0.53% management fee, and has gained approximately 11.3% year to date.