The impact of midterm elections on the Japanese stock market
The US midterm elections will be held on November 3, 2026. These elections take place at the halfway point of the US president’s four-year term and do not directly elect the president. However, they serve as an opportunity to judge the leader of the economic powerhouse that is the United States, and they may have some impact on Japanese stock prices. We asked Xi Wang of the Information Division, Business Promotion Department at Aizawa Securities, based on historical data. (Interviewer: Yuki Mochizuki)
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The impact of midterm elections on the Japanese stock market
—Do midterm elections have an impact on the Japanese stock market?
Looking at past anomalies (empirical rules), both the NY Dow and the Nikkei Stock Average tend to be sluggish during midterm election years. However, it is difficult to say that the election itself is affecting the Japanese stock market. Stock prices move based on the US financial environment, economic fluctuations, and trade conditions at the time, and I believe it is just a coincidence that these overlap with midterm election years.
—What specific figures are emerging?
Looking at the average rate of return since the war (after 1945), the NY Dow shows 4.7% in midterm election years and 5.4% in presidential election years, with almost no difference. On the other hand, the Nikkei Stock Average shows 1.9% in midterm election years compared to 19.7% in presidential election years, which is clearly inferior.
However, the Nikkei Stock Average fluctuates wildly from year to year. For example, the Nikkei Stock Average during the midterm elections (2018) under the first Trump administration was minus 12.1%. As of mid-September 2026, it has fluctuated wildly, up 27.4% compared to the beginning of the year, and this is one reason why the average value appears low.
—Why are the fluctuations so intense?
Honestly, the elections have nothing to do with it. In 2022, stock prices fell significantly due to major US interest rate hikes and quantitative tightening (QT); in 2018, due to the US-China trade war and QT; and in 2002, due to the aftermath of the IT bubble burst. QT is a policy where the central bank reduces the bonds it had purchased to support the economy, thereby tightening the money supply in the market. There are also factors unique to Japan; in 1998, the Asian financial crisis and domestic financial instability were factors, and in 2010, the yen’s appreciation to the 80 yen per dollar range was also cited as a background factor.