By Dominique Fong
Japanese stocks on Monday posted the biggest daily gain in more than four months, erasing last week’s losses triggered by Brexit fears.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -3.34% ended up 4% amid rising hopes for a fresh fiscal stimulus package that would lift the world’s third-largest economy. The move was the best one-day gain for Japanese stocks since March 2, when the benchmark rose 4.1%.
Elsewhere in the region, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -1.60% ended up 2%, Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +1.18% rose 1.3% and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.27% gained 1.6%. China’s Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.60% edged up 0.2%.
Shares in Japan rose after Prime Minister Shinzo Abe’s ruling coalition, led by his Liberal Democratic Party, on Sunday increased its control of the upper house. The coalition’s firmer grip means policy makers can more easily approve a bigger fiscal stimulus package this autumn.
Abe pledged Monday afternoon that his cabinet would start drawing up a stimulus package on Tuesday, but didn’t specify the size. In a sign of investor confidence in Abe, and relief that government action wouldn’t be hindered by a hung parliament, the Nikkei soared as high as 4.7% after the prime minister’s comments.
“The fact that he got a strong majority was kind of a stamp of approval from the voters,” said Frank Benzimra, Asia equity strategist for Société Générale. “You could have some kind of mega-fiscal package to be voted on in autumn, in the same range as the stimulus that you had in 2008 to 2009. That might be one of the reasons that you see the market is strong today.”
The prospect of stimulus policies further encouraged investors, who were already in good spirits from Friday’s stronger-than-expected U.S. jobs report that suggested the nation’s economic recovery was back on track.
“The [Japanese] economic package may get large,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. “It may not be that positive, but [it is] certainly not negative.”
For most of Monday’s trading session, Japanese stocks rallied despite the yen’s stubborn strength. The currency’s gain typically stokes worries that Japanese exports won’t be as competitive abroad, leading investors to dump exporters’ shares.
After Abe called for fiscal stimulus, the yen /zigman2/quotes/210561789/realtime/sampled USDJPY -0.1039% fell sharply later in Japan’s trading day, weakening to ¥102.07 to one U.S. dollar. A weaker yen will be the most important factor driving gains in Japanese stocks, said Ichiyoshi Asset Management’s Akino.
Shares of video-game maker Nintendo /zigman2/quotes/201616881/delayed NTDOY -2.66% surged 25%, building on a 13% gain last week after its affiliate, Pokemon Co., released a new mobile game, Pokemon Go, in several countries.
The new smartphone game that has fans chasing Pokémon characters through real-life city streets turned into an unexpected craze, adding $9 billion of market value to Nintendo in just a few days.
Meanwhile, Chinese stocks rose, led by materials and mining shares, despite the yuan staying near last Thursday’s five-and-a-half-year low against the U.S. dollar. The divergence is a contrast to last August, when stocks around the world plunged after Chinese authorities weakened the yuan and said it was part of efforts to let market forces determine the currency’s value.
Zijin Mining Group Co. /zigman2/quotes/204517000/delayed HK:2899 -4.68% and Zhongjin Gold Corp. /zigman2/quotes/207741711/delayed CN:600489 -1.46% each rose 10%, hitting the limit on how far a share price can move in one day in China, as investors bet further global monetary easing political and economic uncertainty would drive demand for the safe-haven metal.
Chinese investors appeared to shrug off Sunday’s release of lower-than-expected consumer inflation data for June showing a 1.9% rise from a year earlier , compared with May’s 2.0% increase.
“Probably the markets have been so occupied by Brexit that the renminbi is now flying under the radar,” said Larry Hu, economist at Macquarie Capital, using another name for the yuan.
—Ewen Chew, Wei Gu and Hiroyuki Kachi contributed to this article.