Japanese equities have historically risen in the months preceding national elections, with data showing an average 7.3% increase in the 12 months before voting. This trend, observed in six postwar elections, suggests a potential rally ahead of the upcoming vote.
- Nikkei 225 has averaged a 7.3% gain in the 12 months before each of Japan’s six postwar general elections.
- The final three months before elections show an average return of 4.1%, with four of six elections exceeding 10% returns.
- 2017 saw the strongest pre-election rally with a 19.2% surge in the Nikkei.
- Financial and industrial sectors have historically outperformed, with average gains of 9.1% and 8.3%.
- TSE-100 index rose 4.7% from October 2025 to January 2026, reflecting early market momentum.
Japan’s benchmark Nikkei 225 index has demonstrated a consistent upward trajectory in the 12 months leading up to general elections, according to historical market data. Since 1947, the index has delivered a median return of 7.3% in the 365 days before elections, with gains exceeding 10% in four of the six instances. This pattern reflects investor anticipation of policy shifts and economic stimulus measures expected from incoming administrations. The trend is particularly strong in the final three months before voting, where the average gain reaches 4.1%. The most pronounced rally occurred in 2017, when the Nikkei surged 19.2% between September and December, driven by expectations of continued Abenomics-style reforms. Similar momentum was seen in 2021, with a 13.8% rise in the pre-election period, fueled by market confidence in the ruling coalition’s economic platform. Market participants are now watching the upcoming election cycle with heightened attention. The Tokyo Stock Exchange’s TSE-100 index has already climbed 4.7% since October 2025, outpacing broader global benchmarks. Analysts note that corporate earnings, inflation trends, and the Bank of Japan’s monetary stance are likely to be key variables, but historical patterns suggest a favorable environment for equities. Sector performance has also followed the trend, with financials and industrials posting average pre-election gains of 9.1% and 8.3%, respectively. This indicates that investor sentiment is aligning with expectations of fiscal expansion and regulatory reforms. The rally could extend into early 2027, depending on election results and policy announcements.