6361.T

• Context of the 2026 House of Representatives Dissolution: On January 19, 2026, Prime Minister Takaichi announced the dissolution of the House of Representatives, with voting and vote counting scheduled for February 8. Following the announcement, the Nikkei 225 Average hit a new high above 54,000 yen, and market expectations have already been priced in to stock values. Monex Securities' Keita Yamaguchi notes that the timing of the dissolution itself has limited additional impact on stock prices. On the concern that the next fiscal year's budget bill will not pass parliamentary debate by the end of March, Prime Minister Takaichi stated that sufficient progress has been made on key measures including inflation control ahead of dissolution, and the February 8 election timeline still leaves enough time to pass the budget. While the timeline is tight, it is not considered a major risk factor for markets at present.
• Current Sector Performance Under the Takaichi Administration: Since Prime Minister Takaichi took office in mid-October 2025, the banking and machinery sectors have seen substantial gains. Market participants have targeted sectors prioritized in Prime Minister Takaichi's policy agenda, and the early-2026 rally reflects the market expectation that the ruling Liberal Democratic Party (LDP) will win a majority in the lower house. The information and communications sector has underperformed recently, but this does not mean sustained weakness is expected: major constituent SoftBank Group hit new highs recently, is a highly volatile AI-linked stock, and would rebound quickly if positive AI-related news emerges, as AI is expected to remain a core market theme in 2026.
• Historical Relationship Between Lower House Elections and Stock Prices: Analysis of nearly 20 post-1969 election cycles shows that the Nikkei 225 posts positive returns between the dissolution announcement and election day in all cases except the October 2024 election. The 2024 decline occurred because the LDP failed to present a clear growth strategy, giving the market no clear positive catalysts. The 2012 46th House of Representatives election, which brought the Abe Administration back to power with an LDP majority, led to massive post-election gains driven by Abenomics' three arrows (bold monetary easing, flexible fiscal policy, and growth strategy to stimulate private investment): the Nikkei 225 rose roughly 60% over 100 trading days after the election. In the current 2026 cycle, the Nikkei 225 rose from 50,339 yen at the end of 2025 to over 54,000 yen in mid-January 2026, a gain of nearly 8% in two weeks, which is comparable to the roughly 10% pre-election gain seen in the 2012 election cycle. Prime Minister Takaichi has pledged to continue the Abenomics policy line, a framework market participants have dubbed "Sanaenomics". While fiscal expansion raises some concerns about potential interest rate increases, the market has broadly interpreted this policy as supportive of economic growth, forming the current base case scenario.

• If the LDP wins a majority in the 2026 election, historical market anomalies show that stock prices tend to remain in a bull trend for 3 to 6 months during an election year, so the market is expected to remain firm for roughly the next six months. The current rally to new all-time highs reflects the market's base case expectation that the LDP will secure a stable number of seats.
• There is historical precedent for a large post-election rally similar to the 2012 Abe Administration rally in the current cycle, which serves as a reference for potential future upside. The 2012 rally eventually moved into overbought territory, but the scale of that historical gain is still a relevant reference for the current market.

No corporate product segment financial performance data is provided in this transcript. This content is a market commentary on Japanese equities centered on the 2026 House of Representatives election, not a corporate earnings call with segment financial results.

• The future trajectory of stock prices is highly dependent on the election outcome. The opposition Constitutional Democratic Party and Communist Party have formed a cooperative alliance to prevent the LDP from winning a landslide. Prime Minister Takaichi has publicly stated she will resign if the LDP fails to secure a majority. If the LDP does not win a majority, the market expectations that have already been priced into current stock values could unwind sharply, leading to significant downside. Investors should prepare for this risk.
• High theme-driven stocks in the machinery sector already have elevated valuations, so investors should monitor order trends to confirm that solid earnings growth can justify current price levels before investing.

Q: When specifically will the impact of the House of Representatives dissolution hit stock prices?

A: The impact has already appeared. By mid-January 2026, the Nikkei 225 crossed 54,000 yen, so expectations are already priced in. The actual timing of the dissolution itself is not very important for market direction.

Q: Is there a risk that the budget bill will not be passed by the end of March due to the dissolution timeline?

A: Prime Minister Takaichi confirmed that sufficient progress on core policies like inflation control was completed before the dissolution. With the election set for February 8, there is still enough time to pass the next fiscal year's budget. While the timeline is tight, this is not a meaningful source of uncertainty at present.

Q: Which sectors have rallied during the current 'Takaichi rally'?

A: Looking at returns for the three months since Prime Minister Takaichi took office (mid-October 2025) and year-to-date 2026 returns, banking and machinery sectors have posted large gains. Sectors aligned with the Prime Minister's policy priorities have seen consistent buying interest from the start, and the year-to-date rally reflects market expectations of an LDP majority. These policy-prioritized sectors remain in good shape.

Q: Does the underperformance of the information and communications sector mean there is no upside going forward?

A: No, that is not the case. Large constituent SoftBank Group recently hit new all-time highs, and it is a highly volatile AI-focused stock. AI will remain a core market theme in 2026, so positive AI news would quickly push the entire sector into positive territory.

Q: Is the bullish trend around this election specific to this cycle, or has it happened historically?

A: Looking at data from dissolution announcement to election day for nearly 20 lower house elections since 1969, the Nikkei 225 posts positive returns in all cases except the October 2024 election. The 2024 election saw declines because the LDP failed to present a clear growth strategy, leaving no positive catalysts for the market.

Q: Does high market expectations for the current government mean we can expect continued bullish performance?

A: The Nikkei 225 started 2026 just below 50,000 yen and has trended steadily higher between the dissolution announcement and the election. However, post-election stock performance has varied across historical cycles and does not follow a single consistent trend.

Q: What drove the large post-election rally after the 46th (2012) election marked by the yellow line on the graph?

A: The 2009 45th election saw the LDP lose in a landslide and the Democratic Party of Japan take power. The DPJ government's policies including tax increases left the Japanese economy in a weak position. The 2012 election was called by then-DPJ leader Yoshihiko Noda, and the LDP won a majority. LDP President Shinzo Abe launched Abenomics, whose aggressive policy mix drove the major post-election rally.

Q: Could we see a similar scenario play out today, similar to 2012 and unlike the 2024 election?

A: That is the current base case scenario. Prime Minister Takaichi continues the Abenomics policy line, a framework the market calls Sanaenomics. While fiscal expansion raises some concerns about interest rate increases, the policy is viewed broadly positively as economic support, which is the main scenario priced in by markets. In 2012, the Nikkei 225 rose 60% to over 15,000 yen from the mid-9,000 yen level in 100 days post-election. While that rally looks excessive in hindsight, that historical example of large gains is a useful reference for the current cycle.

Q: The Nikkei 225 already rallied strongly in 2025 and has hit new all-time highs to start 2026. Can we expect further upside going forward?

A: Further gains are possible, but outcomes are fully dependent on the election result. The Constitutional Democratic Party and Communist Party have formed an opposition alliance to block an LDP landslide. Prime Minister Takaichi has stated she will resign if the LDP does not win a majority, so if that outcome occurs, the expectations already priced in could unravel quickly. Investors should be prepared for this downside risk. That said, the current prevailing expectation is that the LDP will secure enough seats, which is the market's base case.

Q: If the bull trend continues, how long can investors expect it to last?

A: Historically, there is a market anomaly where stocks tend to rally for 3 to 6 months in an election year. If the LDP wins a majority in 2026, the market should stay firm for roughly the next six months.

Q: We ran a screen on the machinery sector using Monex Meigara Scouter with the following conditions: more than 10% sales growth, more than 10% operating profit growth, 10-year high close, ROE of at least 12%, PBR of at least 1x. 15 stocks passed the screen, including semiconductor names. Which of these stocks look promising for the future?

A: This screening criteria captures mostly high-quality names with stable profit growth and strong capital structure, all trading above 1x PBR with positive market valuations. These are exactly the names leading the current machinery sector rally. The key question for investors is whether this rally can continue, so the next step in screening is to check whether current full-year earnings will come in as expected and whether next year's earnings will grow further than this year's results. For example, IHI is tied to the defense theme, Disco is tied to semiconductors, both are high-theme stocks. They already have elevated valuations that draw caution, but if you check order trends and confirm continued solid earnings, they still have room for further investment gains.

Q: Monex Meigara Scouter lets you view consensus analyst earnings forecasts for next year on a chart after screening. How can this be used?

A: The orange line on the chart shows next year's consensus forecast, and lets you easily identify which high-quality stocks are expected to grow earnings next year. For example, Ebara Corporation (6361) is positioned in the upper right of the chart, and is one name worth watching. On the other hand, you can choose to avoid names where consensus expects earnings to stall. For example, consensus analyst forecasts for Sega Sammy are tilted lower for next year, so that name can be avoided based on this data. This tool is a useful reference for making investment decisions.