90 days. NEAR-TERM POSITIVE
If the new cabinet took a more proactive line on monetary policy, the appointment of the new (BOJ) governor and deputy governors could reflect that orientation, Nomura strategists wrote in a note.
We might also see expectations for an improvement in the chilly relationship with China and for government spending. We think such expectations would produce a positive response on the equity markets, at least in the near term.
But a trader said he doubted an LDP government would have any long-term positive impact on the Nikkei as the party was in power for a long time before Noda's Democratic Party of Japan kicked it out of office in 2009, and it had not been able to pull the country out of deflation during its tenure.
For now, though, investors were upbeat. Japan's megabanks were in demand after they reported their first-half results after the market close on Wednesday. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group were up between 2.5 and 3.2 percent.
BNP Paribas's Maruyama said it was a bit risky to chase exporters given the fiscal issue in the United States and the euro zone debt crisis.
Banks and real estate companies were the best bet to play the rally in Japanese equities in the short-term, he added.
The real estate sector climbed 2.4 percent, with Sumitomo Realty & Development Co Ltd up 3.5 percent and Mitsui Fudosan Co Ltd adding 2.6 percent.
Social gaming company Gree Inc shed 2.3 percent, however, after it disappointed the market with poor results for the first quarter ended September.