Japan's Nikkei hits all-time high on Wall Street rally, snap election bets

By Kevin Buckland

TOKYO, Jan 13 (Reuters) - Japan's Nikkei share average surged to a record high on Tuesday, as markets played catch-up with Wall Street's recent two-day rally following a public holiday in the Asian nation earlier this week.

Investors also bought equities on expectations of increased fiscal spending on speculation that Japanese Prime Minister Sanae Takaichi may call an early election to bolster her coalition government's parliamentary majority, fuelling hopes for additional stimulus.

Japanese investors, like global peers, mostly appeared undeterred by the U.S. Justice Department's criminal investigation of Federal Reserve Chair Jerome Powell.

The Nikkei .N225 jumped as much as 3.6% to a record 53,814.79, and remained close to that level at 0053 GMT.

The broader Topix .TOPX rose as much as 2.4% to 3,599.31, also a record peak.

Overnight, the Dow .DJI and S&P 500 .SPX both climbed to all-time peaks, with tech shares among the outperformers.

The head of coalition partner Ishin said he met with Takaichi on Friday and that she may call an early election. Local media had earlier reported that Takaichi was considering one as soon as next month.

It would be the first time for Takaichi to face voters, giving her a chance to capitalise on the strong public approval ratings she has enjoyed since taking office in October.

"It's widely believed in markets that if Takaichi dissolves parliament, the result will be a weaker yen, higher equities and lower bond prices," based on the idea that "early elections mean proactive fiscal spending," said Maki Sawada, an equities strategist at Nomura Securities.

Investor sentiment was further lifted by a sharply weaker yen than when Tokyo last closed on Friday, as a softer currency increases the value of overseas earnings for Japan's export-heavy corporations.

Shares of automakers advanced, with Toyota Motor 7203.T jumping 5.1% and Subaru 7270.T up 4.1%.

The biggest gainers were semiconductor-sector shares. Chip-testing equipment maker Advantest 6857.T soared 8.4% and chip-making tool manufacturer Tokyo Electron 8035.T vaulted 7.7%.

Of the Nikkei's 225 components, 209 advanced and only 16 declined.