Japan’s Nikkei 225 index surged 2.17% on Wednesday to close at a new record of 51,307.65, marking the first time it has surpassed the 51,000 threshold. The rally was propelled by renewed market confidence in United States-Japan economic relations and growing expectations of another rate cut from the U.S. Federal Reserve.
The momentum in Japanese equities followed Tuesday’s signing of a new rare earths framework by U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi. Investors saw the deal as a step forward for critical supply chains and a signal of deepening cooperation between the two nations.
Meanwhile, growing conviction that the Federal Open Market Committee (FOMC) will introduce a second consecutive 25 basis point interest rate reduction added upward pressure on stocks, as markets factor in further monetary policy support for a global economy showing signs of slowing.
Trump’s visit to Japan marked his inaugural meeting with Prime Minister Takaichi, who took office earlier this month. President Trump also paid a visit to Emperor Naruhito at the Imperial Palace during his trip.
FitchSolutions’ GeoQuant noted that Takaichi’s leadership is anticipated to steer the long-governing Liberal Democratic Party toward a more economically liberal stance while upholding socially conservative values and adopting a firmer approach to national security.
Market participants now largely expect the Fed to lower the federal funds rate by another 25 basis points, following September’s cut, bringing it to a target range of 3.75%-4.00%. If Fed Chair Jerome Powell signals a dovish stance, expectations for future Fed cuts will build, fueling continued market gains, veteran investor Louis Navellier wrote in a daily commentary.
