Japan's Nikkei rallies on weaker yen, PM Takaichi election prospects

By Rocky Swift

TOKYO, Feb 2 (Reuters) - Japan's Nikkei share average rallied on Monday as a weaker yen and a strong election poll for fiscal dove Prime Minister Sanae Takaichi's party boosted demand for risk assets.

The benchmark Nikkei 225 Index .N225 was up 0.3% at 53,476.35, after rising as much as 1.7% earlier in the day. The broader Topix .TOPX climbed 0.5% to 3,582.92. So far, the Nikkei is up 5.9% for the year.

The ruling Liberal Democratic Party (LDP) is likely to win a landslide victory in a snap lower house vote that Takaichi called for February 8, a survey by the Asahi newspaper showed.

Takaichi is seeking to solidify her grip on the LDP and seize a mandate for her expansionary fiscal policy that has been cheered by the stock market even as it weighs on Japanese government bonds and the yen.

Political stability is generally positive for shares, and Monday's market reflects that optimism, said Takahisa Odaka, a senior strategist at Nomura Securities.

"Regardless of the election outcome, as many things remain unclear, we're seeing tailwinds from that aspect," Odaka said.

"Furthermore, the weaker yen is likely having a positive effect, lifting sectors that seemed to be negatively impacted by the exchange rate."

There were 172 advancers on the Nikkei index against 52 decliners. The largest gainers in the index were department store operators Isetan Mitsukoshi 3099.T and Takashimaya 8233.T, with both up 5%.

The biggest losers were semiconductor inspection equipment maker Lasertec 6920.T, which plunged 10%, followed by Sumitomo Metal Mining 5713.T, down 8.8%.