Japanese defense stocks surged on the 9th amid expectations that Japan's defense policy will be strengthened following Prime Minister Sanae Takaichi's landslide victory in the general election.
According to Bloomberg, Kawasaki Heavy Industries shares soared approximately 17% during trading to reach an all-time high, boosted by "surprise earnings" from the previous quarter. Shares of other defense companies including Mitsubishi Heavy Industries and IHI also rose more than 5%.
These "Big Three" heavy industries are Japan's representative defense stocks. Mitsubishi Heavy Industries, the sector leader, is Japan's main contractor for the Global Combat Air Programme (GCAP) next-generation fighter jet development. Kawasaki Heavy Industries has achieved strong results in submarines and aerospace engines. IHI is expanding its business into satellites after developing the GCAP engine. Furukawa Electric, which possesses core laser weapon technology, also surged 19.1% from the previous day, ranking first among Nikkei constituent stocks in gains.
The prospect of constitutional revision is cited as the backdrop for the surge in defense stocks. The Liberal Democratic Party secured more than two-thirds of the 465 seats in the House of Representatives general election, making unilateral constitutional amendment possible and raising the likelihood that the right to maintain military forces—which Prime Minister Takaichi has indicated—will be added to the constitution.
Hiroshi Namioka, chief strategist at T&D Asset Management, told Bloomberg, "Securing a two-thirds majority will make it easier to push for constitutional revision. This election result will be a considerable positive for defense-related stocks."
Rising expectations for eased weapons export regulations have also raised the possibility of competition with Korean defense companies. Bloomberg Intelligence analysts including Eric Zhu analyzed, "It is almost certain that Japan will ease weapons export regulations as part of Prime Minister Takaichi's broad military reforms. This will intensify regional competition with Korean defense companies."
Strengthening defense capabilities is also an issue with high public support in Japan. In a Cabinet Office poll conducted in November-December last year, 45% of respondents said the Self-Defense Forces' size and capabilities should be strengthened, marking a record high.