Tokyo takes off

Asia shares were up on Monday after the Japanese prime minister's Liberal Democratic Party secured more than two-thirds of seats in the parliament's lower house. Takaichi's mandate for more spending and tax cuts helped the Nikkei jump nearly 4% to reach a new all-time high.

The yen and Japanese government bonds were broadly stable on Monday. That's potentially because these markets had already priced in the known – Takaichi's lavish fiscal agenda. Investors are now waiting to learn more about the unknown – how she will fund it.

The yen has also been supported by expectations that the government will directly intervene in foreign exchange markets if the currency weakens toward the all-important 160 per dollar level.

Elsewhere, Wall Street futures were steady on Monday after Friday's decisive rebound, which took the S&P 500 and Nasdaq around 2% higher. Chipmakers powered the rebound, with Nvidia, AMD and Broadcom all jumping by more than 7%, while software and data services companies – battered by AI fears earlier in the week – recouped some losses.

For now, though, chipmakers' gain may be AI hyperscalers' loss amid continued trepidation about the latter's sky-high spending plans. Amazon, for instance, dropped 5.6% on Friday after announcing plans for a more than 50% rise in capex in 2026.

Meantime, investors also appeared to be rotating out of pricey mega-caps and into cheaper, smaller companies. While the S&P 500 and Nasdaq both rallied around 2% on Friday, the broader Russell 2000 index posted a 3.5% gain.

Overall, the mood music appears brighter than it was in the middle of last week, with Wall Street's so-called fear gauge, the VIX, slipping for the first time in three days on Friday.

In commodities, gold and silver both firmed on Monday after strong Friday rebounds.

Looking forward, the major fixture of the week is likely to be the raft of U.S. economic data slated for release, including January's delayed employment report. Investors will also parse retail sales and CPI for signs the economy is soft enough to keep alive bets for a mid-year rate cut.

Graphics are produced by Reuters.

Japan's Nikkei gained nearly 4% on Monday to surpass the 56,000 level for the first time, as the decisive majority for the ruling LDP party cleared the way for more spending and tax cuts.

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