Tokyo's Topix stock index ended at a 31-year high and the Nikkei at nearly a five-month high Monday on hopes that a possible fresh stimulus package will be proposed by contenders of the ruling Liberal Democratic Party's leadership race.
The Topix index of all First Section issues on the Tokyo Stock Exchange finished 25.77 points, or 1.28 percent, higher from Friday at 2,041.22, its highest close since Aug. 16, 1990, when the Japanese economy was experiencing an asset-inflated bubble.
The Topix, which is calculated based on market capitalization of all First Section issues, reflects the overall trend in the stock market. On Monday, the total market capitalization of the First Section issues advanced to a record 750 trillion yen, beating the previous record logged in March.
The 225-issue Nikkei Stock Average ended up 531.78 points, or 1.83 percent, at 29,659.89, closing at its highest level since April 19.
The Nikkei, which hit a 30-year high over the 30,000 line on Feb. 16, was not as strong as the Topix as shares that have major impact on the benchmark such as Fast Retailing Co. remain weak, brokers said.
The Uniqlo casual clothing chain operator has faced allegations that its production process involves forced labor of the Muslim Uyghur minority in Xinjiang, China.
Gainers were led by marine transportation, securities house and machinery issues.
The U.S. dollar was top heavy in the upper 109 yen range as the unit was sold after lower-than-expected U.S. job growth data for August released late last week, dealers said.
The data dampened sentiment that the interest rate gap between the United States and Japan will widen, as expectations grew that the U.S. Federal Reserve will not rush to start scaling back its massive bond-buying program that has supported the economy, the dealers said.
At 5 p.m., the dollar fetched 109.89-91 yen compared with 109.64-74 yen in New York and 110.03-04 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.1862-1864 and 130.35-39 yen against $1.1874-1884 and 130.27-37 yen in New York and $1.1874-1875 and 130.65-69 yen in Tokyo late Friday afternoon.
The yield on the benchmark 10-year Japanese government bond rose 0.005 percentage point from Friday's close to 0.040 percent as investors sold the safe-haven debt after a rally in stocks improved their risk appetite, dealers said.
Shares extended their winning streak to six days, during which the Topix gained nearly 6 percent and the Nikkei rose over 7 percent.
Following Prime Minister Yoshihide Suga's abrupt announcement on Friday that he will not run in the LDP's leadership election on Sept. 29, market sentiment has improved as contenders begin to formulate policies to better cope with the coronavirus pandemic, brokers said.
"The market was lifted by expectations of a new economic relief policy and a change in Japan, such as in its administration and diplomacy if Mr. Kono is elected," said Shingo Ide, chief equity strategist at NLI Research Institute.
Ide was referring to Taro Kono, the vaccination minister who, according to some media polls, is the most popular figure among the post-Suga LDP hopefuls.
Toshikazu Horiuchi, an equity strategist at IwaiCosmo Securities Co., said, "The upbeat momentum triggered by the positive surprise of Mr. Suga announcing he will step down has continued and prompted buying."
"An election is a buying catalyst among market anomalies," Horiuchi said.
The advances were also supported by relatively fewer numbers in new coronavirus cases reported in recent days as well as progress in vaccine rollouts, Horiuchi added.
On the First Section, advancing issues outnumbered decliners 1,554 to 532, while 102 ended unchanged.
Major mobile phone carriers continued their climb from late last week on expectations of business improvement as hopes grew that they will not face further pressure from Suga to lower mobile phone fees.
Nippon Telegraph and Telephone advanced 114 yen, or 3.7 percent, to 3,221 yen, KDDI rose 129 yen, or 3.6 percent, to 3,669 yen and SoftBank added 15.50 yen, or 1.0 percent, to 1,535.50 yen.
Trading volume on the main section fell to 1,176.83 million shares from Friday's 1,243.10 million shares.