Japan’s defense, tech stocks climb as ‘Takaichi trade’ reignites

Defense equipment makers Kawasaki Heavy Industries Ltd., Japan Steel Works Ltd. and IHI Corp. all soared at least 10% at one point on Monday, sending the Topix index’s measure of machinery makers to an all-time intraday high.

Japanese defense and tech shares soared on speculation they’ll benefit from more government spending after the election win of the pro-stimulus conservative Sanae Takaichi positions her to become the nation’s next prime minister.

Defense equipment makers Kawasaki Heavy Industries Ltd., Japan Steel Works Ltd. and IHI Corp. all soared at least 10% at one point on Monday, sending the Topix index’s measure of machinery makers to an all-time intraday high. Chip-related shares, including Tokyo Electron Ltd. and Advantest Corp. also surged, outperforming the benchmark Topix.

“Economic security is something of a mantra for Takaichi,” which is good news for defense and tech shares, said Pelham Smithers, managing director at UK-based Japan equity research firm Pelham Smithers Associates Ltd. She will likely focus on loosening rules around defense equipment production and sales, boosting weapons makers’ stocks, he added.

Takaichi, a proponent of easy fiscal and monetary policy, was elected leader of the ruling Liberal Democratic Party over the weekend. That propelled the overall stock market higher on Monday, while the yen and long-term government bonds fell.