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The outright majority secured for Prime Minister Fumio Kishida’s ruling party is expected to bring about smooth passage of fiscal stimulus and ease concerns of political uncertainty, market players said.

Kishida’s ruling Liberal Democratic Party won 261 seats in Sunday's election to preserve its outright majority in the 465-seat Low House of the Diet. Although the party dropped from the 276 seats it held when the Diet was dissolved, the LDP avoided worst-case scenarios that opinion polls had suggested beforehand.

On Monday, the 225-issue Nikkei average jumped 754.39 points, or 2.61%, from Friday to reach 29,647.08, its highest close since Sept. 28, reflecting investors' relief following the LDP's comfortable win.

"First and foremost we’ll have stability, and for the short-term investor in Japanese stocks that’s great news,” said Richard Kaye, a portfolio manager at Comgest Asset Management Japan Ltd. "There’s going to be no uncertainty, no major changes in policy.”

"Hopes grew for (an upcoming) fiscal stimulus, with the size of the possible cash handout to be the biggest focus," said Kazuo Kamitani, a strategist in the Investment Content Department of Nomura Securities Co.

"Following the general election, investors also anticipated the ruling parties will be able to gain a stable base of power in next year's Upper House election," Kamitani added.

"By securing a majority, it seems the fiscal stimulus plan will be decided smoothly,” said Takahiro Sekido, chief Japan strategist at MUFG Bank Ltd. in Tokyo.

Kishida has pledged to draw up measures worth tens of trillions of yen soon after the vote, and told NHK on Sunday night that he wanted to pass an extra budget by the end of the year. The ruling coalition will have to work on bolstering an economy that likely shrank over the summer due to a COVID-19 surge and supply bottlenecks, according to estimates by several economists.

Business leaders were also quick to welcome the victory of the ruling coalition, calling for strong leadership to revive the economy hit by the coronavirus pandemic.

Masakazu Tokura, chairman of the Japan Business Federation, said the body hopes the Kishida government will address the economic recovery as the most important issue and restore social and economic activities, while preventing the spread of COVID-19 infections.

"I would like the Kishida administration, which has earned the strong confidence of the people, to deliver strong leadership to address many issues in Japan and abroad, and work on them promptly," Tokura said in a statement.

Tokura, who heads Japan's most influential business lobby also known as Keidanren, said the challenges also include realizing carbon neutrality by 2050.

Kengo Sakurada, chairman of the Japan Association of Corporate Executives, also expressed hope that Kishida would continue his efforts to realize a "new capitalism" that aims to spur growth in the world's third-largest economy while expanding the middle class through wealth redistribution.

"Japan is facing the last chance to turn around the stagnation that it has experienced for many years," Sakurada said in a statement. "With that understanding, I would like the ruling party to lead bold policy discussions with a medium— to long-term view."

But the victory for the LDP, which has ruled Japan for all but four of the past 66 years, could splash cold water on hopes for economic reforms, some said.

"The reform mindset is the most important factor for raising the stock market, but so far this spirit hasn’t been seen by the Kishida administration. Foreign investors in particular won’t be satisfied,” said Tatsushi Maeno, senior strategist of Okasan Asset Management Co. in Tokyo.

Kishida campaigned on plans to spread the fruits of economic growth more evenly, after low-paid workers were disproportionately hit by falling incomes during the pandemic. But he has put off detailing many of his economic policies until after the election, with many investors still uncertain whether his redistribution policies are just talk or will be followed by action.

"Since the supplementary budget is expected to be decided by the Cabinet by the end of November, increasing the issuance of government bonds will continue to be a major theme,” said Katsutoshi Inadome, a senior fixed income strategist of Mitsubishi UFJ Morgan Stanley Securities in Tokyo. "But at least the result of the Lower House election won’t cause bond selling.”

Projections published by Yomiuri and Nikkei newspapers on Friday had shown that Kishida, who took over from unpopular former Prime Minister Yoshihide Suga about a month ago, might struggle to maintain his rule without the help of junior coalition partner Komeito.

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