Japan’s Pro-Stimulus Leader Sparks Global Stock Rally, Yen Slumps – Asia Market Wrap

Global markets were jolted after Japan’s election of a pro-stimulus leader fueled expectations for aggressive fiscal spending, igniting a surge in equities while currencies and bonds weakened. Investors sought refuge in alternative assets such as gold and Bitcoin amid the policy shake-up.

Asian shares climbed to a record, with the Nikkei 225 Index soaring 4.8% to an all-time high after Sanae Takaichi emerged as Japan’s likely next prime minister. The yen tumbled nearly 2% to 150 per dollar, hitting a record low versus the euro. Longer-dated Japanese bonds suffered their steepest drop in months on concern a Takaichi government would issue more debt to fund tax cuts. US Treasuries and Australian bond futures also declined.

Gold broke through $3,900 an ounce to reach another record, extending this year’s powerful rally across commodities. Bitcoin notched a fresh all-time high over the weekend. Oil advanced after OPEC+ agreed to restore just 137,000 barrels a day of suspended supply — a slower pace than earlier this year. Futures for US and European equities also pointed higher.

Global stocks have rallied sharply, shrugging off the US government shutdown and threats of mass federal layoffs, as traders double down on bets that artificial intelligence investments will ultimately deliver long-term profits for tech firms. Many have dubbed the shift into gold and crypto the emerging “debasement trade,” a hedge against fiscal excess and political turbulence.

Momentum has been further boosted by a wave of new AI partnerships and OpenAI’s $500 billion valuation, which cemented its status as the world’s most valuable startup. Equity markets have scaled successive highs this year, buoyed by enthusiasm for AI, optimism over looser monetary policy, and resilient corporate earnings.

While the shutdown has delayed the release of key economic reports such as nonfarm payrolls, swap markets remain confident the Federal Reserve will deliver another quarter-point rate cut at its October meeting.