The victory of Takashi Saito ignites expectations for constitutional revision and military strengthening, leading to a collective "surge" in Japanese defense stocks

According to reports obtained by Zhitong Finance APP, in the Japanese House of Representatives election held on February 8, the ruling coalition formed by the Liberal Democratic Party and the Japan Innovation Party secured a majority of seats, which means that Prime Minister Sanae Takaichi will continue to govern. Investors' expectations that Takaichi will accelerate the process of strengthening Japan's defense capabilities led to a significant rise in Japanese defense stocks on Monday. Data showed that Kawasaki Heavy Industries' stock price rose by as much as 17%, reaching an intraday historical high, with strong performance also contributing to the boost; other defense contractors IHI and Mitsubishi Heavy Industries saw their stock prices rise by over 5%. It is reported that in the election on Sunday, the Liberal Democratic Party secured a two-thirds majority in the 465-seat House of Representatives. With this "super majority," the ruling coalition led by Takaichi will find it easier to pass legislation and may reintroduce the controversial topic of constitutional amendment, which includes explicitly writing in the right to maintain a military. Hiroshi Namioka, Chief Strategist at T&D Asset Management, stated that after securing the two-thirds majority seat threshold, "constitutional amendments may also be easier to advance." He added that the election results will be a "significant positive for defense-related stocks." Namioka also pointed out that the coalition partner supporting constitutional amendments—the Japan Innovation Party—also increased its seats, and voting behavior indicates a rising public interest in defense issues. The overwhelming victory of the Liberal Democratic Party in the election has also raised market expectations that Japanese authorities will relax regulations on arms exports, which will expand business opportunities for Japanese arms manufacturers. Eric Zhu, an analyst at Bloomberg Intelligence, stated, "After Takaichi's party won a super majority in the unexpectedly held election in Japan, it is almost certain that Japan will relax arms export restrictions as part of its broader military reforms." The analyst added that this will pose regional-level competition for South Korean defense manufacturers. Kazuhiro Toyoda, head of Japanese equities at Schroders Investment Management, also stated, "With the consolidation of the government's ruling foundation, it will be easier to hold a more positive view on plans for Japanese defense companies to expand their overseas business in the future. Defense stocks are likely to gain attention in the stock market."