Since Biden's disastrous debate last week, Trump's lead has continued to expand, triggering a craze to find key winning trades in global markets. History has shown that the Japanese stock market is a good choice.

It is reported that in the year following Trump's victory in the 2016 U.S. presidential election, the TOPIX index in Japan rose nearly 30% in U.S. dollars, outpacing the S&P 500 and the Morgan Stanley Capital International Index, both of which rose by about 20%. Strategists say that the boost from the weak yen will boost the Japanese stock market.

Tomo Kinoshita, global market strategist at Invesco Asset Management Japan, said, "As U.S. bond yields rise and the yen depreciates against the dollar, it should also support the Japanese stock market. Given that manufacturing companies dominate the Japanese stock market, Trump's victory should benefit most Asian stock markets, with the Japanese stock market expected to benefit the most."

For years, the Japanese stock market has been overlooked by global investors, but recent signs suggest that the Asian economy has shaken off deflation and is on a sustainable expansion path, and the Japanese stock market is becoming active. The TOPIX index broke through its bubble-era peak on Thursday, reaching a historic high, and further buying may further stimulate the index's rise.

Analysts also said that the weakness of the yen will greatly boost the Japanese economy, which is conducive to exports of manufacturers such as Toyota and Nissan. According to data compiled by the media, the manufacturing sector accounts for more than half of Japan's total market value. Due to the huge yield differential between Japan and the United States, the yen's exchange rate against the dollar has fallen nearly 13% this year, the worst among major currencies.

In addition, valuation is another factor. Among major markets outside of China, Japan has the cheapest valuation for growth stocks, with Morgan Stanley Capital International's Japanese growth index having a one-year forecast P/E ratio of 22.

However, analysts also specifically pointed out that Trump's victory may not boost the Japanese stock market as a whole.

Jasmine Duan, senior investment strategist for Asia at Royal Bank of Canada Wealth Management, said, "We believe that if Trump is re-elected, Japan will not be the safest market in Asia. If the yen continues to weaken, the Trump administration may take action to force the yen to appreciate, which might in turn benefit the Chinese stock market."

However, some argue that as global investors expect Trump to take a tougher stance, the Japanese stock market could be a potential beneficiary. This is because Japanese companies are increasingly focusing on corporate governance, and the Bank of Japan's shift from an extremely loose policy stance indicates that the Japanese economy is accelerating its recovery.

Naka Matsuzawa, chief strategist at Nomura Securities, said, "Japanese stocks will be one of the better choices for global investors, and bank stocks should perform better as the market focuses on the neutrality of Bank of Japan policy."

Editor/new